10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-33458

TERADATA CORPORATION

(Exact name of registrant as specified in its charter) 

Delaware	75-3236470
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

17095 Via Del Campo

San Diego, California 92127

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (866) 548-8348

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol	Name of Each Exchange on which Registered:
Common Stock, $0.01 par value	TDC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐    No  ý

At July 31, 2019, the registrant had approximately 114.1 million shares of common stock outstanding.

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TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

	Description	Page
Item 1.	Financial Statements
	Condensed Consolidated Statements of (Loss) Income (Unaudited) Three and Six Months Ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three and Six Months Ended June 30, 2019 and 2018	6
	Condensed Consolidated Balance Sheets (Unaudited) June 30, 2019 and December 31, 2018	7
	Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2019 and 2018	8
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Three and Six Months Ended June 30, 2019 and 2018	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II—OTHER INFORMATION
	Description	Page
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39

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Item 6.	Exhibits	40
	Signatures	41

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Part 1—FINANCIAL INFORMATION

Item 1. Financial Statements.

Teradata Corporation

Condensed Consolidated Statements of (Loss) Income (Unaudited)

	Three Months Ended June 30,						Six Months Ended   June 30,
In millions, except per share amounts	2019			2018			2019			2018
Revenue
Recurring	$	338		$	312		$	669		$	614
Perpetual software licenses and hardware	29			97			60			166
Consulting services	111			135			217			270
Total revenue	478			544			946			1,050
Cost of revenue
Cost of recurring	107			88			213			178
Cost of perpetual software licenses and hardware	26			73			51			121
Cost of consulting services	109			133			222			278
Total cost of revenue	242			294			486			577
Gross profit	236			250			460			473
Operating expenses
Selling, general and administrative expenses	145			163			296			315
Research and development expenses	81			77			159			152
Total operating expenses	226			240			455			467
Income from operations	10			10			5			6
Other expense, net
Interest expense	(8		)	(5		)	(17		)	(10		)
Interest income	6			4			12			7
Other expense	(3		)	(3		)	(5		)	(5		)
Total other expense, net	(5		)	(4		)	(10		)	(8		)
Income (loss) before income taxes	5			6			(5		)	(2		)
Income tax expense	6			2			6			1
Net (loss) income	$	(1	)	$	4		$	(11	)	$	(3	)
Net (loss) income per common share
Basic	$	(0.01	)	$	0.03		$	(0.09	)	$	(0.02	)
Diluted	$	(0.01	)	$	0.03		$	(0.09	)	$	(0.02	)
Weighted average common shares outstanding
Basic	115.5			119.5			116.3			120.4
Diluted	115.5			121.5			116.3			120.4

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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Teradata Corporation

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

	Three Months Ended June 30,						Six Months Ended   June 30,
In millions	2019			2018			2019			2018
Net (loss) income	$	(1	)	$	4		$	(11	)	$	(3	)
Other comprehensive loss:
Foreign currency translation adjustments	(1		)	(21		)	(7		)	(17		)
Derivatives:
Unrealized loss on derivatives, before tax	(9		)	(3		)	(13		)	(3		)
Unrealized loss on derivatives, tax portion	2			—			3			—
Unrealized loss on derivatives, net of tax	(7		)	(3		)	(10		)	(3		)
Defined benefit plans:
Defined benefit plan adjustment, before tax	1			4			2			4
Defined benefit plan adjustment, tax portion	—			(1		)	—			(1		)
Defined benefit plan adjustment, net of tax	1			3			2			3
Other comprehensive loss	(7		)	(21		)	(15		)	(17		)
Comprehensive loss	$	(8	)	$	(17	)	$	(26	)	$	(20	)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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Teradata Corporation

Condensed Consolidated Balance Sheets (Unaudited)

In millions, except per share amounts	June 30, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	635		$	715
Accounts receivable, net	377			588
Inventories	35			28
Other current assets	82			97
Total current assets	1,129			1,428
Property and equipment, net	317			295
Capitalized software, net	49			72
Right of use assets - operating lease, net	58			—
Goodwill	396			395
Acquired intangible assets, net	12			16
Deferred income taxes	70			67
Other assets	92			87
Total assets	$	2,123		$	2,360
Liabilities and stockholders’ equity
Current liabilities
Current portion of long-term debt	$	25		$	19
Current portion of finance lease liability	32			17
Current portion of operating lease liability	20			—
Accounts payable	102			141
Payroll and benefits liabilities	114			224
Deferred revenue	498			490
Other current liabilities	74			118
Total current liabilities	865			1,009
Long-term debt	466			478
Finance lease liability	54			30
Operating lease liability	44			—
Pension and other postemployment plan liabilities	102			113
Long-term deferred revenue	82			105
Deferred tax liabilities	4			3
Other liabilities	139			127
Total liabilities	1,756			1,865
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	—			—
Common stock: par value $0.01 per share, 500.0 shares authorized, 114.1 and 116.8 shares issued at June 30, 2019 and December 31, 2018, respectively	1			1
Paid-in capital	1,491			1,418
Accumulated deficit	(1,009		)	(823		)
Accumulated other comprehensive loss	(116		)	(101		)
Total stockholders’ equity	367			495
Total liabilities and stockholders’ equity	$	2,123		$	2,360

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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Teradata Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited) 

	Six Months Ended   June 30,
In millions	2019			2018
Operating activities
Net loss	$	(11	)	$	(3	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	77			64
Stock-based compensation expense	37			35
Deferred income taxes	—			(6		)
Changes in assets and liabilities:
Receivables	211			185
Inventories	(7		)	2
Current payables and accrued expenses	(155		)	(31		)
Deferred revenue	(15		)	90
Other assets and liabilities	(33		)	(46		)
Net cash provided by operating activities	104			290
Investing activities
Expenditures for property and equipment	(27		)	(58		)
Additions to capitalized software	(2		)	(4		)
Net cash used in investing activities	(29		)	(62		)
Financing activities
Repurchases of common stock	(175		)	(157		)
Repayments of long-term borrowings	(6		)	(40		)
Repayments of credit facility borrowings	—			(240		)
Payments of finance leases	(9		)	—
Other financing activities, net	36			18
Net cash used in financing activities	(154		)	(419		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			(15		)
Decrease in cash, cash equivalents and restricted cash	(79		)	(206		)
Cash, cash equivalents and restricted cash at beginning of period	716			1,089
Cash, cash equivalents and restricted cash at end of period	$	637		$	883
Supplemental cash flow disclosure:
Assets acquired under operating lease	$	4		$	—
Assets acquired under finance lease	$	48		$	—

Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:

	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	635	$	715
Restricted cash	2		1
Total cash, cash equivalents and restricted cash	$	637	$	716

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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Teradata Corporation

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

	Common Stock				Paid-in		Accumulated			Accumulated Other Comprehensive
In millions	Shares		Amount		Capital		Deficit			Loss			Total
December 31, 2018	117		$	1	$	1,418	$	(823	)	$	(101	)	$	495
Net loss	—		—		—		(10		)	—			(10		)
Employee stock compensation, employee stock purchase programs and option exercises	1		—		48		—			—			48
Repurchases of common stock, retired	(1	)	—		—		(58		)	—			(58		)
Pension and postemployment benefit plans, net of tax	—		—		—		—			1			1
Unrealized loss on derivatives, net of tax	—		—		—		—			(3		)	(3		)
Currency translation adjustment	—		—		—		—			(6		)	(6		)
March 31, 2019	117		$	1	$	1,466	$	(891	)	$	(109	)	$	467
Net loss	—		—		—		(1		)	—			(1		)
Employee stock compensation, employee stock purchase programs and option exercises	—		—		25		—			—			25
Repurchases of common stock, retired	(3	)	—		—		(117		)	—			(117		)
Pension and postemployment benefit plans, net of tax	—		—		—		—			1			1
Unrealized loss on derivatives, net of tax	—		—		—		—			(7		)	(7		)
Currency translation adjustment	—		—		—		—			(1		)	(1		)
June 30, 2019	114		$	1	$	1,491	$	(1,009	)	$	(116	)	$	367

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	Common Stock					Paid-in		Accumulated			Accumulated Other Comprehensive
In millions	Shares			Amount		Capital		Deficit			Loss			Total
December 31, 2017	122			$	1	$	1,320	$	(579	)	$	(74	)	$	668
Net loss	—			—		—		(7		)	—			(7		)
Employee stock compensation, employee stock purchase programs and option exercises	1			—		30		—			—			30
Repurchases of common stock, retired	(2		)	—		—		(77		)	—			(77		)
Adoption of ASC 606	—			—		—		26			—			26
Currency translation adjustment	—			—		—		—			4			4
March 31, 2018	121			$	1	$	1,350	$	(637	)	$	(70	)	$	644
Net income	—			—		—		4			—			4
Employee stock compensation, employee stock purchase programs and option exercises	—			—		26		—			—			26
Repurchases of common stock, retired	(2		)	—		—		(81		)	—			(81		)
Pension and postemployment benefit plans, net of tax	—			—		—		—			3			3
Unrealized loss on derivatives, net of tax	—			—		—		—			(3		)	(3		)
Currency translation adjustment	—			—		—		—			(21		)	(21		)
June 30, 2018	$	119		$	1	$	1,376	$	(714	)	$	(91	)	$	572

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

These statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows of Teradata Corporation (“Teradata” or the “Company”) for the interim periods presented herein. The year-end 2018 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates.  

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Teradata’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Annual Report”). The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year. Prior period amounts have been restated to conform to the current year presentation, except for lease accounting discussed in Notes 2 and 12.

2. New Accounting Pronouncements

Fair Value Measurement.  In August 2018, the Financial Accounting Standards Board ("FASB") issued new guidance that modifies disclosure requirements related to fair value measurement. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this update while delaying adoption of the additional disclosures until their effective date. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Compensation-Retirement Benefits-Defined Benefit Plans-General. In August 2018, the FASB issued new guidance that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2020, with early adoption permitted, and is to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. In August 2018, the FASB issued new guidance that reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). For public companies, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The effects of this standard on our financial position, results of operations or cash flows are not expected to be material.

Codification Improvements to Financial Instruments-Credit Losses, Derivatives and Hedging, and Financial Instruments. In June 2016, the FASB issued Accounting Standards, Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. Since the

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issuance of this accounting standard, the Board has identified certain areas that require clarification and improvement. In May 2019, the FASB issued guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets measured at amortized cost (except held-to-maturity securities) using the fair value option. The election is to be applied on an instrument-by-instrument basis. For entities that have already adopted the new credit losses standard, the relief is effective for fiscal years beginning after December 15, 2019 and interim periods therein, and early adoption is permitted. For all other entities, the guidance is effective upon adoption of the new credit losses standard. The company is currently evaluating this new guidance to determine the impact it may have on our financial position, results of operations or cash flows.

Recently Adopted Guidance

Leases. In February 2016, the FASB issued new guidance under Topic 842, which requires a lessee to account for leases as finance or operating leases. Both types of leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement and cash flow recognition. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Entities will classify leases to determine how to recognize lease-related revenue and expense. We adopted the new standard as of January 1, 2019 using the modified retrospective adoption approach utilizing the optional transition method with prior periods not recast and have elected certain of the practical expedients allowed under the standard. The Condensed Consolidated Financial Statements for the three and six months ended June 30, 2019 are presented under the new standard, while comparative years presented are not adjusted and continue to be reported in accordance with our historical accounting policy. See Note 12 for more information.

Comprehensive Income. In February 2018, the FASB issued new guidance for Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02), which allows companies to reclassify stranded tax effects resulting from the Tax Reform Act from accumulated other comprehensive income to retained earnings. The impact of applying this standard did not have a material impact on our condensed consolidated financial statements.

Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. In June 2018, the FASB issued new guidance to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments are intended to assist entities in evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) or as exchange (reciprocal) transactions and determining whether a contribution is conditional. The Company adopted this guidance on January 1, 2019, which did not have a material impact on our condensed consolidated financial statements.

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3. Revenue from Contracts with Customers

Disaggregation of Revenue from Contracts with Customers

The following table presents a disaggregation of revenue:

	Three months ended June 30,				Six months ended June 30,
in millions	2019		2018		2019		2018
Americas
Recurring	$	217	$	199	$	430	$	392
Perpetual software licenses and hardware	12		40		31		62
Consulting services	40		48		77		97
Total Americas	269		287		538		551
EMEA
Recurring	75		70		148		137
Perpetual software licenses and hardware	10		10		17		43
Consulting services	37		47		70		96
Total EMEA	122		127		235		276
APAC
Recurring	46		43		91		85
Perpetual software licenses and hardware	7		47		12		61
Consulting services	34		40		70		77
Total APAC	87		130		173		223
Total Revenue	$	478	$	544	$	946	$	1,050

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the condensed consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:

	As of
in millions	June 30, 2019		December 31, 2018
Accounts receivable, net	$	377	$	588
Contract assets	$	6	$	14
Current deferred revenue	$	498	$	490
Long-term deferred revenue	$	82	$	105

Revenue recognized during the six months ended June 30, 2019 from amounts included in deferred revenue at the beginning of the period was $402 million.

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Transaction Price Allocated to Unsatisfied Obligations

The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at June 30, 2019:

in millions	Total at June 30, 2019		Year 1		Year 2 and Thereafter
Remaining unsatisfied obligations	$	2,530	$	1,182	$	1,348

The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,636 million of the amount includes customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us. The Company expects to recognize revenue of approximately $437 million in the next year from contracts that are non-cancelable. Customers typically do not cancel before the end of the contractual term and historically the Company has seen very little churn in its customer base. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.

4. Contract Costs

The Company capitalizes sales commissions and other contract costs that are incremental direct costs of obtaining customer contracts if the expected amortization period of the asset is greater than one year. These costs are recorded in Other Assets on the Company’s balance sheet. The capitalized amounts are calculated based on the annual recurring revenue and total contract value for individual multi-term contracts. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as selling, general and administrative expenses on a straight-line basis over the expected period of benefit, which is typically around four years. These costs are periodically reviewed for impairment. The following table identifies the activity relating to capitalized contract costs:

in millions	December 31, 2018	Capitalized	Amortization		June 30, 2019
Capitalized contract costs	54	17	(8	)	63

5. Supplemental Financial Information

	As of
In millions	June 30, 2019		December 31, 2018
Inventories
Finished goods	$	23	$	16
Service parts	12		12
Total inventories	$	35	$	28
Deferred revenue
Deferred revenue, current	$	498	$	490
Long-term deferred revenue	82		105
Total deferred revenue	$	580	$	595

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6. Goodwill and Acquired Intangible Assets

Effective January 1, 2019, the Company implemented an organizational change to its operating segments and will report future results under the separate segments: Americas, EMEA and APAC. The following table identifies the activity relating to goodwill by operating segment.

In millions	December 31, 2018		Reassignment of Goodwill			Currency translation adjustments		June 30, 2019
Goodwill
Americas	$	253	$	—		$	—	$	253
International	142		(142		)	—		—
EMEA	—		88			—		88
APAC	—		54			1		55
Total goodwill	$	395	$	—		$	1	$	396

Acquired intangible assets were specifically identified when acquired and are deemed to have finite lives. The gross carrying amount and accumulated amortization for the Company's acquired intangible assets were as follows:

		June 30, 2019					December 31, 2018
In millions	Amortization Life (in Years)	Gross Carrying Amount		Accumulated Amortization and Currency Translation Adjustments			Gross Carrying Amount		Accumulated Amortization and Currency Translation Adjustments
Acquired intangible assets
Intellectual property/developed technology	1 to 7	$	35	$	(23	)	$	35	$	(20	)

The aggregate amortization expense (actual and estimated) for acquired intangible assets is as follows:

	Three Months Ended June 30				Six Months Ended June 30,
In millions	2019		2018		2019		2018
Amortization expense	$	1	$	2	$	3	$	4

	Actual		For the years ended (estimated)
In millions	2018		2019		2020		2021		2022
Amortization expense	$	7	$	6	$	4	$	4	$	2

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7. Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. As a result of the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act”), the Company changed its indefinite reversal assertion related to its undistributed earnings of its foreign subsidiaries and no longer considers a majority of its foreign earnings permanently reinvested outside of the United States ("U.S."). As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.

The effective tax rate is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
In millions	2019		2018		2019		2018
Effective tax rate	120.0	%	33.3	%	(120.0	)%	(50.0	)%

For the three months and six months ended June 30, 2019, a $4 million discrete tax item was recorded related to an uncertain tax position resulting from the reversal of the Tax Court’s decision in the Altera case by the Ninth Circuit Court of Appeals on June 7, 2019. The Altera case focused on whether current U.S. Treasury Regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations are valid. As a result of this discrete item and incremental tax expense related to equity compensation, the Company recorded income tax expense of $6 million on a pre-tax net loss of $5 million for the six months ended June 30, 2019, resulting in an effective income tax rate of (120.0)%.

There were no material discrete tax items recorded for the three or six month periods ended June 30, 2018. Discrete tax items related to interest accruals on uncertain tax positions and equity-based compensation resulted in income tax expense of $1 million on a pre-tax net loss of $2 million for the six months ended June 30, 2018, resulting in an effective income tax rate of (50.0)%.

The Company estimates its annual effective tax rate for 2019 to be approximately 21%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction. The 2017 Tax Act subjects U.S. shareholders to a tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to GILTI in the year the tax is incurred. The Company does not expect a material amount of tax expense related to GILTI based on our forecasted marginal effective tax rate for 2019.

8. Derivative Instruments and Hedging Activities

As a portion of Teradata’s operations is conducted outside the U.S. and in currencies other than the U.S. dollar, the Company is exposed to potential gains and losses from changes in foreign currency exchange rates. In an attempt to mitigate the impact of currency fluctuations, the Company uses foreign exchange forward contracts to hedge transactional exposures resulting predominantly from foreign currency denominated inter-company receivables and payables. The forward contracts are designated as fair value hedges of specified foreign currency denominated inter-company receivables and payables and generally mature in three months or less. The fair values of foreign exchange contracts are based on market spot and forward exchange rates and represent estimates of possible value that may not be realized in the future. Across its portfolio of contracts, Teradata has both long and short positions relative to the U.S. dollar. As a result, Teradata’s net involvement is less than the total contract notional amount of the Company’s foreign exchange forward contracts.

Gains and losses from foreign exchange forward contracts are fully recognized each period and reported along with the offsetting gain or loss of the related hedged item, either in cost of revenues or in other income (expense), depending on the nature of the related hedged item.

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In June 2018, Teradata executed a five-year interest rate swap with a $500 million initial notional amount to hedge the floating interest rate of its Term Loan, as more fully described in Note 11. The Company uses interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facility. The notional amount of the hedge will step-down according to the amortization schedule of the term loan. The notional amount of the hedge was $494 million as of June 30, 2019.

The Company performed an initial effectiveness assessment in the third quarter of 2018 on the interest rate swap and the hedge was determined to be effective. The hedge is being evaluated qualitatively on a quarterly basis for effectiveness. Changes in fair value are recorded in Accumulated Other Comprehensive Loss and periodic settlements of the swap will be recorded in interest expense along with the interest on amounts outstanding under the term loan facility.

The following table identifies the contract notional amount of the Company’s derivative financial instruments:

	As of
In millions	June 30, 2019		December 31, 2018
Contract notional amount of foreign exchange forward contracts	$	156	$	256
Net contract notional amount of foreign exchange forward contracts	$	46	$	35
Contract notional amount of interest rate swap	$	494	$	500

All derivatives are recognized in the condensed consolidated balance sheets at their fair value. The notional amounts represent agreed-upon amounts on which calculations of dollars to be exchanged are based and are an indication of the extent of Teradata’s involvement in such instruments. These notional amounts do not represent amounts exchanged by the parties and, therefore, are not a measure of the instruments. Refer to Note 10 for disclosures related to the fair value of all derivative assets and liabilities.

The Company does not hold or issue derivative financial instruments for trading purposes, nor does it hold or issue leveraged derivative instruments. By using derivative financial instruments to hedge exposures to changes in foreign exchange and interest rates, the Company exposes itself to credit risk. The Company manages exposure to counterparty credit risk by entering into derivative financial instruments with highly rated institutions that can be expected to fully perform under the terms of the applicable contracts.

9. Commitments and Contingencies

In the ordinary course of business, the Company is subject to proceedings, lawsuits, governmental investigations, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, tax matters and other regulatory compliance and general matters. We are not currently a party to any litigation, nor are we aware of any pending or threatened litigation against us that we believe would materially affect our business, operating results, financial condition or cash flows.

Guarantees and Product Warranties. Guarantees associated with the Company’s business activities are reviewed for appropriateness and impact to the Company’s financial statements. Periodically, the Company’s customers enter into various leasing arrangements with a third-party leasing company as part of a revenue transaction, whereby the leasing company purchases the equipment from Teradata and leases it to the customer. In some instances, the Company guarantees the leasing company a minimum value at the end of the lease term on the leased equipment. As of June 30, 2019, the maximum future payment obligation of this guaranteed value and the associated liability balance was $3 million.

The Company provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls and cost of replacement parts. For each consummated sale, the Company recognizes the total customer revenue and

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records the associated warranty liability under other current liabilities in the balance sheet using pre-established warranty percentages for that product class.

The following table identifies the activity relating to the warranty reserve for the six months ended June 30:

In millions	2019			2018
Warranty reserve liability
Beginning balance at January 1	$	3		$	4
Accrual of warranties issued	1			2
Settlements (in cash or in kind)	(2		)	(3		)
Balance at June 30	$	2		$	3

The Company also offers extended and/or enhanced coverage to its customers in the form of maintenance contracts. The Company accounts for these contracts by deferring the related maintenance revenue over the extended and/or enhanced coverage period. Costs associated with maintenance support are expensed as incurred. Amounts associated with these maintenance contracts are not included in the table above.

In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third-party asserts patent or other infringement on the part of the customer for its use of the Company’s products. The Company has entered into indemnification agreements with the officers and directors of its subsidiaries. From time to time, the Company also enters into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement, and as such the Company has not recorded a liability in connection with these indemnification arrangements. Historically, payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

Concentrations of Risk. The Company is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments, and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Teradata’s business often involves large transactions with customers, and if one or more of those customers were to default in its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses were adequate at June 30, 2019 and December 31, 2018.

The Company is also potentially subject to concentrations of supplier risk. Our hardware components are assembled exclusively by Flex Ltd. (“Flex”). Flex procures a wide variety of components used in the manufacturing process on behalf of the Company. Although many of these components are available from multiple sources, Teradata utilizes preferred supplier relationships to provide more consistent and optimal quality, cost and delivery. Typically, these preferred suppliers maintain alternative processes and/or facilities to ensure continuity of supply. Given the Company’s strategy to outsource its manufacturing activities to Flex and to source certain components from single suppliers, a disruption in production at Flex or at a supplier could impact the timing of customer shipments and/or Teradata’s operating results. In addition, a significant change in the forecasts to any of these preferred suppliers could result in purchase obligations for components that may be in excess of demand.

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10. Fair Value Measurements

Fair value measurements are established utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as significant other observable inputs, such as quoted prices in active markets for similar assets or liabilities, or quoted prices in less-active markets for identical assets; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s assets and liabilities measured at fair value on a recurring basis include money market funds, interest rate swaps and foreign currency exchange contracts. A portion of the Company’s excess cash reserves are held in money market funds which generate interest income based on the prevailing market rates. Money market funds are included in cash and cash equivalents in the Company’s balance sheet. Money market fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy.

When deemed appropriate, the Company minimizes its exposure to changes in foreign currency exchange rates through the use of derivative financial instruments, specifically, foreign exchange forward contracts. Additionally, in June 2018, Teradata executed a five-year interest rate swap with a $500 million initial notional amount in order to hedge the floating interest rate on its term-loan. The fair value of these contracts and swaps are measured at the end of each interim reporting period using observable inputs other than quoted prices, specifically market spot and forward exchange rates. As such, these derivative instruments are classified within Level 2 of the valuation hierarchy. Fair value of unrealized gains for open contracts are recorded in other assets and the fair value of unrealized losses are recorded in other liabilities in the Company's balance sheet. The fair value of foreign exchange forward contracts recorded in other assets was $1 million and the amount recorded in other liabilities was immaterial at June 30, 2019. The amount of assets and liabilities at December 31, 2018 was not material. Realized gains and losses from the Company’s fair value hedges net of corresponding gains or losses on the underlying exposures were immaterial for the three and six months ended June 30, 2019 and 2018.

The Company’s other assets and liabilities measured at fair value on a recurring basis and subject to fair value disclosure requirements at June 30, 2019 and December 31, 2018 were as follows:

			Fair Value Measurements at Reporting Date Using
In millions	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds at June 30, 2019	$	218	$	218	$	—	$	—
Money market funds at December 31, 2018	$	246	$	246	$	—	$	—
Liabilities
Interest rate swap at June 30, 2019	$	20	$	—	$	20	$	—
Interest rate swap at December 31, 2018	$	7	$	—	$	7	$	—

11. Debt

On June 11, 2018, Teradata replaced its existing five-year, $400 million revolving credit facility with a new 400 million $400 million revolving credit facility (the “Credit Facility”). The Credit Facility ends on June 11, 2023, at which point any remaining outstanding borrowings would be due for repayment unless extended by agreement of the parties for up to two additional one-year periods. In addition, under the terms of the Revolving Credit Agreement, Teradata from time to time and subject to certain conditions may increase the lending commitments

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under the Revolving Credit Agreement in an aggregate principal amount up to an additional $200 million, to the extent that existing or new lenders agree to provide such additional commitments. The outstanding principal amount of the Revolving Credit Agreement bears interest at a floating rate based upon, at Teradata’s option, a negotiated base rate or a Eurodollar rate plus, in each case, a margin based on Teradata’s leverage ratio. In the near term, Teradata would anticipate choosing a floating rate based on London Interbank Offered Rate (“LIBOR”). The Credit Facility is unsecured but is guaranteed by certain of Teradata’s material domestic subsidiaries and contains certain representations and warranties, conditions, affirmative, negative and financial covenants, and events of default customary for such facilities. As of June 30, 2019, the Company had no borrowings outstanding under the Credit Facility, leaving $400 million in additional borrowing capacity available under the Credit Facility. The Company was in compliance with all covenants as of  June 30, 2019.

Also, on June 11, 2018, Teradata closed on a new senior unsecured $500 million five-year term loan, the proceeds of which plus additional cash-on-hand were used to pay off the remaining $525 million of principal on its existing term loan. The $500 million term loan is payable in quarterly installments, which commenced on June 30, 2019 with 1.25% of the initial principal amount due on each of the first eight payment dates; 2.50% of the initial principal amount due on each of the next four payment dates; 5.0% of the initial principal amount due on each of the next three payment dates; and all remaining principal due on June 11, 2023. The outstanding principal amount under the term loan agreement bears interest at a floating rate based upon a negotiated base rate or a Eurodollar rate plus a margin based on the leverage ratio of the Company. As of June 30, 2019, the term loan principal outstanding was $494 million. As disclosed in Note 8, Teradata entered into an interest rate swap to hedge the floating interest rate of the Term Loan. As a result of the swap, Teradata’s fixed rate on the term loan equals 2.86% plus the applicable leverage-based margin as defined in the Term Loan agreement. As of June 30, 2019, the all-in fixed rate is 4.36%. The Company was in compliance with all covenants as of June 30, 2019.

Teradata’s term loan is recognized on the Company’s balance sheet at its unpaid principal balance and is not subject to fair value measurement. However, given that the loan carries a variable rate, the Company estimates that the unpaid principal balance of the term loan would approximate its fair value. If measured at fair value in the financial statements, the Company’s term loan would be classified as Level 2 in the fair value hierarchy.

12. Leases

Lessee

The Company adopted ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach utilizing the optional transition method. Prior year financial statements were not recast using this approach. The Company elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $68 million and $66 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings or cash flows.

The Company leases property and equipment under finance and operating leases. The Company's operating leases consist of automobiles in certain countries and real estate, including office, storage and parking spaces. The duration of these leases range from 2 to 10 years. The Company's finance leases primarily consist of equipment financed for the purpose of delivering services to our customers. For leases with terms greater than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. Many of our leases include variable rental escalation clauses which are recognized when incurred. Some of our leases also include renewal options and/or termination options that are factored into the determination of lease payments and lease terms when it is reasonably certain that the Company will exercise these options. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a

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straight-line basis over the lease term. For real estate leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs). For automobile leases we account for lease and non-lease components together.

When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, real estate leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate used in the calculation of the lease liability is based on the secured rate associated with financed lease obligations for each location of leased property.

The table below presents the lease-related assets and liabilities recorded on the balance sheet:

		As of
in millions, except weighted average calculations	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease assets	Right of use assets - operating lease, net	$	58
Finance lease assets	Property and equipment, net	90
Total lease assets		$	148
Liabilities
Current
Operating	Current portion of operating lease liability	$	20
Finance	Current portion of finance lease liability	32
Noncurrent
Operating	Operating lease liability	44
Finance	Finance lease liability	54
Total lease liabilities		$	150
Weighted-average remaining lease term
Operating leases		3.78 years
Finance leases		2.59 years
Weighted-average discount rate
Operating leases(1)		5.00		%
Finance leases		4.70		%

⁽¹⁾ Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Lessee Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three and six months ended June 30, 2019:

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	Three Months Ended			Six Months Ended
in millions	June 30, 2019			June 30, 2019
Finance lease cost
Depreciation of leased assets	5			9
Interest of lease liabilities	1			2
Operating lease cost	6			18
Sub-lease income from real estate properties owned and leased	(2		)	(4		)
Total lease cost	$	10		$	25

Other Information

The table below presents supplemental cash flow information related to cash paid for amounts included in the measurement of lease liabilities:

	Six Months Ended
in millions	June 30, 2019
Operating cash flows for operating leases	$	12
Operating cash flows for finance leases	$	1
Financing cash flows for finance leases	$	9

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of June 30, 2019:

in millions	Operating Leases			Finance Leases
2019 (balance of year)	$	13		$	21
2020	23			35
2021	17			30
2022	11			5
2023	7			—
Thereafter	5			—
Total minimum lease payments	76			91
Less: amount of lease payments representing interest	(12		)	(5		)
Present value of future minimum lease payments	64			86
Less: current obligations under leases	(20		)	(32		)
Long-term lease obligations	$	44		$	54

The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

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in millions	Operating Leases		Finance Leases
2019	$	24	$	19
2020	20		31
2021	12		—
2022	11		—
2023	6		—
Thereafter	2		—
Total minimum lease payments	$	75	$	50

Lessor

The Company receives rental revenue for leasing hardware offerings to its customers. For our hardware rental offering, the Company owns or leases the hardware and may or may not provide managed services. Leases sometimes include options to renew but typically do not include lessee purchase options. The revenue for these operating leases is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Equipment used for this revenue is reported within Property and equipment, net on the condensed consolidated balance sheet.

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at June 30, 2019:

in millions	Rental Revenue
2019 (balance of year)	$	38
2020	57
2021	43
2022	14
2023	—
Total	$	152

Rental revenue for these operating leases, reported within recurring revenue on the condensed consolidated statements of (loss) income, was $16 million and $30 million for the three and six months ended June 30, 2019, and $9 million and $19 million for the three and six months ended June 30, 2018.

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13. Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the reported period. The calculation of diluted earnings per share is similar to basic earnings per share, except that the weighted average number of shares outstanding includes the dilution from potential shares resulting from stock options, restricted stock awards and other stock awards. The components of basic and diluted earnings per share are as follows:

	Three Months Ended June 30,					Six Months Ended   June 30,
In millions, except per share amounts	2019			2018		2019			2018
Net (loss) income attributable to common stockholders	$	(1	)	$	4	$	(11	)	$	(3	)
Weighted average outstanding shares of common stock	115.5			119.5		116.3			120.4
Dilutive effect of employee stock options, restricted stock and other stock awards	—			2.0		—			—
Common stock and common stock equivalents	115.5			121.5		116.3			120.4
Net loss (income) per share:
Basic	$	(0.01	)	$	0.03	$	(0.09	)	$	(0.02	)
Diluted	$	(0.01	)	$	0.03	$	(0.09	)	$	(0.02	)

For the three months ended June 30, 2019 and six months ended June 30, 2019 and 2018, due to the net loss attributable to Teradata common stockholders, potential common shares that would cause dilution, such as employee stock options, restricted shares and other stock awards, have been excluded from the diluted share count because their effect would have been anti-dilutive. The fully diluted shares would have been 116.7 million for the three months ended June 30, 2019 and 117.7 million and 122.5 million for the six months ended June 30, 2019 and 2018, respectively.

Options to purchase 1.6 million and 1.8 million shares of common stock for the three and six months ended June 30, 2019 and 2.5 million and 2.6 million shares of common stock for the three and six months ended June 30, 2018 were not included in the computation of diluted earnings per share because their exercise prices of these options were greater than the average market price of the common shares for the period, and therefore would have been anti-dilutive.

14. Segment and Other Supplemental Information

Effective January 1, 2019, Teradata implemented an organizational change in which Teradata now manages its business under three geographic regions, which are also the Company’s operating segments: (1) Americas region (North America and Latin America); (2) EMEA region (Europe, Middle East and Africa) and (3) APAC region (Asia Pacific and Japan). For purposes of discussing results by segment, management excludes the impact of certain items, consistent with the manner by which management evaluates the performance of each segment. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by Teradata management to make decisions regarding the segments and to assess financial performance. The chief operating decision maker, who is our President and Chief Executive Officer, evaluates the performance of the segments based on revenue and multiple profit measures, including segment gross profit. For management reporting purposes assets are not allocated to the segments. Prior periods have been restated to conform to the current year presentation.

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The following table presents segment revenue and segment gross profit for the Company:

	Three Months Ended June 30,				Six Months Ended   June 30,
In millions	2019		2018		2019		2018
Segment revenue
Americas	$	269	$	287	$	538	$	551
EMEA	122		127		235		276
APAC	87		130		173		223
Total revenue	478		544		946		1,050
Segment gross profit
Americas	158		154		315		301
EMEA	57		54		107		117
APAC	37		58		71		93
Total segment gross profit	252		266		493		511
Stock-based compensation costs	4		4		7		8
Acquisition, integration, reorganization and transformation-related costs	2		—		5		3
Amortization of capitalized software costs	10		12		21		27
Total gross profit	236		250		460		473
Selling, general and administrative expenses	145		163		296		315
Research and development expenses	81		77		159		152
Income from operations	$	10	$	10	$	5	$	6

    

15. Reorganization and Business Transformation

On June 4, 2018, the Company approved a plan to consolidate certain of its operations, including transitioning its corporate headquarters to San Diego, California from its location in Dayton, Ohio. This plan, which is being executed in connection with Teradata’s comprehensive business transformation from a data warehouse company to a data analytics platform company, is intended to better align the Company’s skills and resources to effectively pursue opportunities in the marketplace. The Company recognized costs of $23 million in 2018 and $12 million in 2019 for employee separation benefits, transition support, facilities lease related costs, outside service, legal and other exit-related costs. The employee separation benefit costs are being expensed over the time period that the employees have to work to earn them. The Company expects that it will incur costs and charges in the range of approximately $35 to $40 million related to the plan and expects the actions will be completed in 2019.

Cash paid in 2018 related to the plan listed above was $11 million. The 2019 activity and the reserves related to the plan are as follows:

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In millions	Balance at December 31, 2018		Expense accruals		Cash payments			Balance at June 30, 2019
Employee separation benefits costs related to headquarter transition and business transformation	$	11	$	4	$	(13	)	$	2
Transition support and other exit related costs for the headquarter transition and business transformation	1		2		(3		)	—
Total	$	12	$	6	$	(16	)	$	2

In addition, the Company incurred $6 million of accelerated amortization in the first six months of 2019 for right-of-use assets associated with the lease on its prior corporate headquarters. The remaining lease liability is included in our operating lease obligations as of June 30 2019 and is not included in the table above.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

You should read the following discussion in conjunction with the Condensed Consolidated Financial Statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q and in the 2018 Annual Report on Form 10-K. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Overview

Teradata Corporation ("we," "us," "Teradata," or the "Company") is a leading hybrid cloud analytics software provider focusing on delivering Pervasive Data Intelligence to our customers, which we define as the ability to leverage 100% of a company’s data to uncover real-time intelligence, at scale. We help customers integrate and simplify their analytics ecosystem, access and manage data, and use analytics to extract answers and derive business value from data. Our solutions and services comprise software, hardware, and related business consulting and support services to deliver analytics across a company’s entire analytical ecosystem.

Teradata’s strategy is based on our mission of transforming how businesses work and people live through the power of data. Our target market is what we call "Megadata" companies - those companies that we believe are the world's most demanding, large-scale, users of data. These Megadata companies face significant challenges including siloed data and conflicting and duplicative solutions that typically results in considerable expense to maintain and to manage the complexity. Our strategy is to provide a differentiated set of offerings to the Megadata target market through a portfolio of integrated data and analytic solutions. Teradata Vantage is a highly-scalable, secure, highly-concurrent, and resilient analytics platform that addresses the challenges that Megadata companies face. By offering customers full integration of their datasets, tools, analytics languages, functions, and engines in one analytical platform, Teradata Vantage reduces customers’ complexity, risk, and costs. Teradata Vantage embraces leading commercial and open source technologies including our market-leading integrated data warehouse engine, and it is available in hybrid environments, on-premises or in the cloud.

All subscription-based Teradata software licenses enable portability of the software license between cloud and on-premises deployment options, which can reduce risk associated with customers’ buying decisions. Customer buying behavior continues to shift from predominantly capital-intensive purchases to these subscription-based purchasing

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options. In the near term, the movement to subscription-based transactions is negatively impacting the timing of our reported revenue and our cash flows because revenue and cash related to subscription-based transactions are recognized and received over time versus upfront as was the case with the capital purchase model. However, the transition to a subscription-based model is expected to increase our recurring revenue, which should create more predictable operating results and cash flow generation. Near term impacts, however, can fluctuate based on the pace of customer adoption, which can be difficult to predict. In the longer term, we expect our reported operating results and cash flow to normalize and increase as more customers transition to these new purchasing and deployment options.

We are continuing to invest in Teradata’s future, including investments to support our cloud-based initiatives, analytical consulting and solutions, realignment of our go-to-market approach, and modernizing our infrastructure.

Teradata has introduced additional financial and performance metrics to allow for greater transparency regarding the progress we are making toward achieving our strategic objectives. These metrics include the following:

• Annual Recurring Revenue ("ARR") - annual contract value for all active and contractually binding term-based contracts at the end of a period. It includes maintenance, software upgrade rights, subscription-based transactions and managed services.

• Bookings Mix - subscription bookings divided by the sum of subscription bookings plus perpetual bookings.

Second Quarter Financial Overview

As more fully discussed in later sections of this MD&A, the following were significant financial items for the second quarter of 2019:

• Total revenue was $478 million for the second quarter of 2019, a 12% decrease compared to the second quarter of 2018, with an underlying 8% increase in recurring revenue as the Company's business shifts to subscription-based transactions offset by a 70% decrease in perpetual software licenses and hardware as deals move to subscription and an 18% decrease in consulting services revenue. Foreign currency fluctuations had a 2% negative impact on total revenue for the quarter.

• Gross margin increased to 49.4% in the second quarter of 2019 from 46.0% in the second quarter of 2018, primarily due to a higher recurring revenue mix as compared to the prior period.

• Operating expenses for the second quarter of 2019 decreased by 6% compared to the second quarter of 2018 primarily due to cost management initiatives.

• Operating income was $10 million in the second quarter of 2019 and 2018.

• Net loss in the second quarter of 2019 was $1 million, compared to net income of $4 million in the second quarter of 2018.

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Results of Operations for the Three Months Ended June 30, 2019

Compared to the Three Months Ended June 30, 2018

Revenue

			% of				% of
In millions	2019		Revenue		2018		Revenue
Recurring	$	338	70.7	%	$	312	57.4	%
Perpetual software licenses and hardware	29		6.1	%	97		17.8	%
Consulting services	111		23.2	%	135		24.8	%
Total revenue	$	478	100	%	$	544	100	%

Total revenue was down $66 million or 12% in second quarter of 2019 and included a 2% negative impact from foreign currency fluctuations. Recurring revenue grew 8%, which included a 3% negative impact from foreign currency fluctuations. This increase in recurring revenue is driven by our movement to subscription-based transactions from perpetual software licenses and hardware transactions, which is consistent with our strategy. Under subscription models, we recognize revenue over time as opposed to the upfront recognition under the perpetual model. We expect to continue to have a significant percentage of bookings be subscription-based, consistent with our overall strategy and to continue to grow recurring revenue and ARR year-over-year.

Revenues from perpetual software licenses and hardware decreased 70%, including a 1% negative impact from foreign currency fluctuations. We expect perpetual revenues to continue to decline as customers switch to our subscription-based offerings. However, some customers continue to purchase on a perpetual basis. Perpetual revenue is primarily hardware-related, as software is generally being sold on subscription. We expect that perpetual revenue will continue to decline in 2019 and will continue to be predominantly hardware-related.

Consulting services revenue decreased 18% and included a 3% negative impact from foreign currency as we are realigning and focusing our consulting resources on higher-margin engagements that drive increased software consumption within our targeted customer base. In the first half of the year we made progress towards our strategy of targeting Megadata companies as we continue to realign our consulting business. We expect consulting revenue to continue to decline as the Company implements this strategic change and focus.

As a portion of the Company’s operations and revenue occur outside the United States, and in currencies other than the U.S. dollar, the Company is exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of July 31, 2019, Teradata is expecting one-to-two percentage points of negative impact from currency translation on our 2019 full year projected revenue growth rate.

Included below are financial and performance growth metrics for 2019:

• At the end of the second quarter of 2019, ARR was $1,350 million, an 11% increase from the second quarter of 2018 including a 1% negative impact from foreign currency as compared to the second quarter of 2018.

• 90% of our bookings mix in the second quarter of 2019 was subscription-based and we continue to expect 70% or more of our 2019 full-year bookings mix to be subscription-based.

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Gross Profit

			% of				% of
In millions	2019		Revenue		2018		Revenue
Recurring	$	231	68.3	%	$	224	71.8	%
Perpetual software licenses and hardware	3		10.3	%	24		24.7	%
Consulting services	2		1.8	%	2		1.5	%
Total gross profit	$	236	49.4	%	$	250	46.0	%

The decrease in recurring revenue gross profit as a percent of revenue was driven by a higher mix of subscription-based revenue as compared to the prior-year period. Subscription-based transactions are typically lower margin as compared to the recurring revenue from legacy software maintenance and software upgrade rights, due to the higher mix of hardware included in subscription-based transactions. Over time, we expect subscription-based margins to increase.

The decrease in perpetual software licenses and hardware gross profit as a percent of revenue was driven by a higher mix of hardware revenue as some customers continue to purchase their hardware upfront while buying the software on a subscription basis, which is recorded in recurring revenue. In addition, our hardware gross margin was negatively impacted by currency swings on inter-company transactions in regions where we cannot hedge currency fluctuations. As we shift to subscription-based transactions and perpetual revenue declines, we expect future perpetual revenue margins to remain lower than prior periods and possibly decline as we exit perpetual-based transactions.

Consulting services gross profit as a percentage of revenue improved slightly as compared to the prior-year period as the Company is taking steps to focus consulting on the top Megadata analytic opportunities to drive consumption of our Vantage software analytics platform and on higher value and higher margin consulting offerings. We continue to expect a decline in overall consulting bookings and revenue compared to prior periods, but we expect future consulting revenue margins to increase.

Operating Expenses

			% of				% of
In millions	2019		Revenue		2018		Revenue
Selling, general and administrative expenses	$	145	30.3	%	$	163	30.0	%
Research and development expenses	81		17.0	%	77		14.1	%
Total operating expenses	$	226	47.3	%	$	240	44.1	%

The selling, general and administrative ("SG&A") expense decrease was driven primarily by lower go-to-market headcount from our prior actions to align our go-to-market teams with our focus on our Megadata and commercial target market.

Research and development ("R&D") expenses increased due to strategic investments in the new Teradata Vantage analytics platform and our cloud offerings.

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Other Expense, net

In millions	2019			2018
Interest income	$	6		$	4
Interest expense	(8		)	(5		)
Other	(3		)	(3		)
Other expense, net	$	(5	)	$	(4	)

Other expense in the second quarter of 2019 and 2018 is comprised primarily of interest expense on long-term debt and finance leases, partially offset by interest income earned on our cash and cash equivalents. Interest income and expense increased compared to the prior year primarily due to increases in interest rates and additional finance leases.

Provision for Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. The 2018 effective tax rate was impacted by the passage of the Tax Cuts and Jobs Act (the “2017 Tax Act”), which was signed into law on December 22, 2017.

As a result of the 2017 Tax Act, the Company changed its indefinite reversal assertion related to its undistributed earnings of its foreign subsidiaries and no longer considers a majority of its foreign earnings permanently reinvested outside of the U.S.

The effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix between the U.S. and other foreign taxing jurisdictions where the Company conducts its business. The Company estimates its full-year effective tax rate for 2019 to be approximately 21%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction and the estimated discrete items to be recognized in 2019. The forecasted tax rate is based on the overseas profits being taxed at an overall effective tax rate of approximately 18%, as compared to the federal statutory tax rate of 21% in the U.S.

The effective tax rate for the three months ended June 30, 2019 and June 30, 2018 were as follows:

	2019		2018
Effective tax rate	120.0	%	33.3	%

For the three months ended June 30, 2019, $4 million of discrete tax expense was recorded related to an uncertain tax position resulting from the reversal of the Tax Court’s decision in the Altera case by the Ninth Circuit Court of Appeals on June 7, 2019. The Altera case focused on whether current U.S. Treasury Regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations are valid.

For the three months ended June 30, 2018, no material discrete tax items were recorded.

Revenue and Gross Profit by Operating Segment

Effective January 1, 2019, Teradata implemented an organizational change in which Teradata now manages its business under three geographic regions, which are also the Company’s operating segments: (1) Americas region (North America and Latin America); (2) EMEA region (Europe, Middle East, and Africa) and (3) APAC region (Asia Pacific and Japan). For purposes of discussing results by segment, management excludes the impact of certain items, consistent with the manner by which management evaluates the performance of each segment. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by Teradata management to make decisions regarding the segments and to assess financial performance. The chief operating decision maker, who is our President and Chief Executive Officer, evaluates the performance of the segments based on revenue and multiple profit measures, including segment gross profit. For management reporting purposes assets are not allocated to the segments. Our segment results are reconciled to total

30

company results reported under GAAP in Note 14 of Notes to Condensed Consolidated Financial Statements (Unaudited). Prior period results have been restated to conform to the current year presentation.

The following table presents segment revenue and segment gross profit for the Company for the three months ended June 30:

			% of				% of
In millions	2019		Revenue		2018		Revenue
Segment revenue
Americas	$	269	56.3	%	$	287	52.8	%
EMEA	122		25.5	%	127		23.3	%
APAC	87		18.2	%	130		23.9	%
Total segment revenue	$	478	100	%	$	544	100	%
Segment gross profit
Americas	$	158	58.7	%	$	154	53.7	%
EMEA	57		46.7	%	54		42.5	%
APAC	37		42.5	%	58		44.6	%
Total segment gross profit	$	252	52.7	%	$	266	48.9	%

Americas

Revenue decreased 6%, which included an increase in recurring revenue of 9% offset by a decrease in perpetual software licenses and hardware revenue and decrease in consulting revenue. The increase in recurring revenue and decline in perpetual revenue were driven by the shift to subscription-based transactions. Segment gross profit as a percentage of revenues was higher primarily due to a higher mix of recurring revenue.

EMEA

EMEA revenue decreased 4%, which included a 4% unfavorable impact from foreign currency fluctuations. An increase of 7% in recurring revenue was offset by a decrease in perpetual software licenses and hardware revenue and decrease in consulting revenue. Segment gross profit as a percentage of revenues was higher primarily due to a higher mix of recurring revenue.

APAC

APAC revenue decreased 33%, which included a 4% unfavorable impact from foreign currency fluctuations. An increase in recurring revenue of 7% was offset by a decrease in perpetual software licenses and hardware revenue and decrease in consulting revenue. Segment gross profit as a percentage of revenues was lower primarily due to a decline in consulting margins, which more than offset a favorable higher mix of recurring revenue.

Results of Operations for the Six Months Ended June 30, 2019

Compared to the Six Months Ended June 30, 2018

Revenue

			% of				% of
In millions	2019		Revenue		2018		Revenue
Recurring	$	669	70.7	%	$	614	58.5	%
Perpetual software licenses and hardware	60		6.3	%	166		15.8	%
Consulting services	217		22.9	%	270		25.7	%
Total revenue	$	946	100	%	$	1,050	100	%

Total revenue was down $104 million or 10% in first six months ended June 30, 2019 and included a 3% negative impact from foreign currency fluctuations. Recurring revenue grew 9%, which included a 3% negative impact from

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foreign currency fluctuations. This is driven by our movement to subscription-based transactions from perpetual software licenses and hardware transactions, which is consistent with our strategy.

Revenues from perpetual software licenses and hardware decreased 64%, including a 1% negative impact from foreign currency fluctuations. The decrease in perpetual software licenses and hardware revenue is consistent with our strategy to sell more subscription-based offerings.

Consulting services revenue decreased 20% and included a 4% negative impact from foreign currency as we are realigning and focusing our consulting resources on higher-margin engagements that drive increased software consumption within our targeted customer base.

Gross Profit

				% of					% of
In millions	2019			Revenue		2018			Revenue
Recurring	$	456		68.2	%	$	436		71.0	%
Perpetual software licenses and hardware	9			15.0	%	45			27.1	%
Consulting services	(5		)	(2.3	)%	(8		)	(3.0	)%
Total gross profit	$	460		48.6	%	$	473		45.0	%

The decrease in recurring revenue gross profit as a percent of revenue was driven by a higher mix of subscription-based revenue as compared to the prior-year period. Subscription-based transactions are typically lower margin as compared to the recurring revenue from legacy software maintenance and software upgrade rights, due to the higher mix of hardware in subscription-based transactions.

The decrease in perpetual software licenses and hardware gross profit as a percent of revenue was driven by a higher mix of hardware revenue as some customers continue to purchase their hardware upfront while buying the software on a subscription basis, which is recorded in recurring revenue. In addition, our hardware gross margin was negatively impacted by currency swings on inter-company transactions in regions where we cannot hedge currency fluctuations.

Consulting services gross profit as a percentage of revenue improved as compared to the prior-year period as the Company is taking steps to focus consulting on the top Megadata analytic opportunities to drive consumption of our Vantage software analytics platform and on higher value and higher margin consulting offerings.

Operating Expenses

			% of				% of
In millions	2019		Revenue		2018		Revenue
Operating expenses
Selling, general and administrative expenses	$	296	31.3	%	$	315	30.0	%
Research and development expenses	159		16.8	%	152		14.5	%
Total operating expenses	$	455	48.1	%	$	467	44.5	%

The SG&A expense decrease was driven by lower go-to-market headcount as we have realigned our go-to-market teams with our focus on our Megadata and commercial target market. This decrease was partially offset by additional expenses associated with our reorganization and restructure of our operations and our go-to-market functions, including moving our corporate headquarters to San Diego, California from the prior location in Dayton, Ohio.

R&D expenses increased due to strategic investments in the new Teradata Vantage analytics platform and our cloud offerings.

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Other Expense, net

In millions	2019			2018
Interest income	$	12		$	7
Interest expense	(17		)	(10		)
Other	(5		)	(5		)
Other expense, net	$	(10	)	$	(8	)

Other expense in the first six months of 2019 and 2018 is comprised primarily of interest expense on long-term debt and finance leases, partially offset by interest income earned on our cash and cash equivalents. Interest income and expense increased compared to the prior year, primarily due to increases in interest rates and additional finance leases.

Provision for Income Taxes

The effective tax rate for the six months ended June 30, 2019 and June 30, 2018 were as follows:

	2019		2018
Effective tax rate	(120.0	)%	(50.0	)%

For the six months ended June 30, 2019, $4 million of discrete tax expense was recorded related to an uncertain tax position resulting from the reversal of the Tax Court’s decision in the Altera case by the Ninth Circuit Court of Appeals on June 7, 2019. The Altera case focused on whether current U.S. Treasury Regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations are valid. As a result of this discrete item and incremental tax expense related to equity compensation, the Company recorded income tax expense of $6 million on a pre-tax net loss of $5 million for the six months ended June 30, 2019, resulting in an effective income tax rate of (120.0%).

There were no material discrete tax items recorded for the six months ended June 30, 2018. Discrete tax items related to interest accruals on uncertain tax positions and equity-based compensation resulted in income tax expense of $1 million on a pre-tax net loss of $2 million for the six months ended June 30, 2018, resulting in an effective income tax rate of (50.0%).

Revenue and Gross Profit by Operating Segment

The following table presents segment revenue and segment gross profit for the Company for the six months ended June 30:

			% of				% of
In millions	2019		Revenue		2018		Revenue
Segment revenue
Americas	$	538	56.9	%	$	551	52.5	%
EMEA	235		24.8	%	276		26.3	%
APAC	173		18.3	%	223		21.2	%
Total segment revenue	$	946	100	%	$	1,050	100	%
Segment gross profit
Americas	$	315	58.6	%	$	301	54.6	%
EMEA	107		45.5	%	117		42.4	%
APAC	71		41.0	%	93		41.7	%
Total segment gross profit	$	493	52.1	%	$	511	48.7	%

Americas

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Revenue decreased 2%, which included a 1% unfavorable impact from foreign currency fluctuations. An increase in recurring revenue was offset by a decrease in perpetual software licenses and hardware revenue and decrease in consulting revenue. The increase in recurring revenue and decline in perpetual revenue were driven by the shift to subscription-based transactions. Segment gross profit as a percentage of revenues was higher primarily due to a higher mix of recurring revenue.

EMEA

EMEA revenue decreased 15%, which includes a 5% unfavorable impact from foreign currency fluctuations. An increase in recurring revenue was offset by a decrease in perpetual software licenses and hardware revenue and decrease in consulting revenue. Segment gross profit as a percentage of revenues was higher primarily due to a higher mix of recurring revenue.

APAC

APAC revenue decreased 22%, which included a 4% unfavorable impact from foreign currency fluctuations. An increase in recurring revenue was offset by a decrease in perpetual software licenses and hardware revenue and a decrease in consulting revenue. Segment gross profit as a percentage of revenues was lower primarily due to a decline in consulting margins, partially offset by a higher mix of recurring revenue.

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Financial Condition, Liquidity and Capital Resources

Cash provided by operating activities decreased by $186 million in the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Teradata used approximately $46 million of cash in the first six month of 2019 for reorganizing and restructuring its operations and go-to-market functions to align to its strategy. The decrease in cash provided by operating activities was also due to cash payments in 2019 related to 2018 variable compensation that were meaningfully higher versus similar payments made in 2018 as well as the Company’s ongoing transition to subscription-based purchasing options, which results in the Company collecting less cash in the current period as customers pay over time.

Teradata’s management uses a non-GAAP measure called “free cash flow,” which is not a measure defined under GAAP. We use free cash flow (which we define as net cash provided by operating activities less capital expenditures for property and equipment and additions to capitalized software) as one measure of assessing the financial performance of the Company, and this may differ from the definition used by other companies. The components that are used to calculate free cash flow are GAAP measures taken directly from the Condensed Consolidated Statements of Cash Flows (Unaudited). We believe that free cash flow information is useful for investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash available after capital expenditures, for among other things, investments in the Company’s existing businesses, strategic acquisitions and repurchase of Teradata common stock. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other non-discretionary expenditures that are not deducted from the measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.

The table below shows net cash provided by operating activities and capital expenditures for the following periods:

	Six Months Ended June 30, 2019
In millions	2019			2018
Net cash provided by operating activities	$	104		$	290
Less:
Expenditures for property and equipment	(27		)	(58		)
Additions to capitalized software	(2		)	(4		)
Free cash flow	$	75		$	228

Financing activities and certain other investing activities are not included in our calculation of free cash flow. There were no other investing activities for the six months ended June 30, 2019 and 2018.

Teradata’s financing activities for the six months ended June 30, 2019 and 2018 primarily consisted of cash outflows for share repurchases and payments on the revolving credit facility, finance leases, and long-term debt. At June 30, 2019, the Company had no outstanding borrowings on the revolving credit facility. The Company purchased approximately 4.3 million shares of its common stock at an average price per share of $40.52 in the six months ended June 30, 2019, and 4.1 million shares at an average price per share of $38.14 in the six months ended June 30, 2018 under the two share repurchase programs that were authorized by our Board of Directors. The first program (the “dilution offset program”), allows the Company to repurchase Teradata common stock to the extent of cash received from the exercise of stock options and the Teradata Employee Stock Purchase Plan (“ESPP”) to offset dilution from shares issued pursuant to these plans. As of June 30, 2019, under the Company’s second share repurchase program (the “general share repurchase program”), the Company had $120 million of authorization remaining to repurchase outstanding shares of Teradata common stock. On July 28, 2019 Teradata's Board of Directors authorized an additional $500 million to be utilized to repurchase Teradata common stock under this share repurchase program. The Company now has a total of $620 million authorized for share repurchases under this share repurchase program. Share repurchases made by the Company are reported on a trade date basis. Our share repurchase activity depends on factors such as our working capital needs, our cash requirements for capital investments, our stock price, and economic and market conditions.

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Proceeds from the ESPP and the exercise of stock options, net of tax, were $37 million for the six months ended June 30, 2019 and $20 million for the six months ended June 30, 2018. These proceeds are included in other financing activities, net in the Condensed Consolidated Statements of Cash Flows (Unaudited).

Our total cash and cash equivalents held outside the United States in various foreign subsidiaries was $224 million as of June 30, 2019 and $364 million as of December 31, 2018. The remaining balance held in the United States was $412 million as of June 30, 2019 and $351 million as of December 31, 2018. Prior to the enactment of the Tax Act, the Company either reinvested or intended to reinvest its earnings outside of the United States. As a result of the Tax Act, the Company has changed its indefinite reinvestment assertion related to foreign earnings that have been taxed in the United States and now considers a majority of these earnings no longer indefinitely reinvested. Effective January 1, 2018, the United States has moved to a territorial system of international taxation, and as such will generally not subject future foreign earnings to United States taxation upon repatriation in future years.

Management believes current cash, cash generated from operations and the $400 million available under the Credit Facility will be sufficient to satisfy future working capital, research and development activities, capital expenditures, pension contributions, and other financing requirements for at least the next twelve months. The Company principally holds its cash and cash equivalents in bank deposits and highly-rated money market funds.

The Company’s ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business and risk factors described in the Company’s 2018 Annual Report on Form 10-K (the “2018 Annual Report”), and elsewhere in this Quarterly Report. If the Company is unable to generate sufficient cash flows from operations, or otherwise comply with the terms of the credit facility and term loan agreement, the Company may be required to seek additional financing alternatives.

Long-term Debt. On June 11, 2018, Teradata replaced its existing five-year, $400 million revolving credit facility with a new $400 million revolving credit facility (the “Credit Facility”). The Credit Facility ends on June 11, 2023 at which point any remaining outstanding borrowings would be due for repayment unless extended by agreement of the parties for up to two additional one-year periods. In addition, under the terms of the Revolving Credit Agreement, Teradata from time to time and subject to certain conditions may increase the lending commitments under the Revolving Credit Agreement in an aggregate principal amount up to an additional $200 million, to the extent that existing or new lenders agree to provide such additional commitments. The outstanding principal amount of the Revolving Credit Agreement bears interest at a floating rate based upon, at Teradata’s option, a negotiated base rate or a Eurodollar rate plus, in each case, a margin based on Teradata’s leverage ratio. In the near term, Teradata would anticipate choosing a floating rate based on London Interbank Offered Rate (“LIBOR”). The Credit Facility is unsecured but is guaranteed by certain of Teradata’s material domestic subsidiaries and contains certain representations and warranties, conditions, affirmative, negative and financial covenants, and events of default customary for such facilities. As of June 30, 2019, the Company had no borrowings outstanding under the Credit Facility, leaving $400 million in additional borrowing capacity available under the Credit Facility. The Company was in compliance with all covenants under the Credit Facility as of June 30, 2019.

Also, on June 11, 2018, Teradata closed on a new senior unsecured $500 million five-year term loan, the proceeds of which plus additional cash-on-hand were used to pay off the remaining $525 million of principal on its existing term loan. The $500 million term loan is payable in quarterly installments, which commenced on June 30, 2019 with 1.25% of the initial principal amount due on each of the first eight payment dates; 2.50% of the initial principal amount due on each of the next four payment dates; 5.0% of the initial principal amount due on each of the next three payment dates; and all remaining principal due on June 11, 2023. The outstanding principal amount under the term loan agreement bears interest at a floating rate based upon a negotiated base rate or a Eurodollar rate plus a margin based on the leverage ratio of the Company. As of June 30, 2019, the term loan principal outstanding was $494 million. Unamortized deferred issuance costs of approximately $3 million are being amortized over the five-year term of the loan. The Company was in compliance with all covenants under the term loan as of June 30, 2019.

In addition, in June 2018, Teradata executed a five-year interest rate swap with a $500 million initial notional amount in order to hedge the floating interest rate on the above-described term loan. The notional amount of the

36

hedge will step-down according to the amortization schedule of the term loan. The notional amount of the hedge was $494 million as of June 30, 2019. As a result of the swap, Teradata’s fixed rate on the term loan equals 2.86% plus the applicable leverage-based margin as defined in the Term Loan agreement. As of June 30, 2019, the all-in fixed rate is 4.36%.

Leases. In the normal course of business, the Company enters into operating and finance leases that impact, or could impact, our liquidity. Leases are described in detail in Note 12 of the Notes to the Condensed Consolidated Financial Statements. The table below provides the undiscounted cash flows for the Company's minimum lease obligations as of June 30, 2019:

in millions	Operating Leases		Finance Leases
2019 (balance of year)	$	13	$	21
2020	23		35
2021	17		30
2022	11		5
2023	7		—
Thereafter	5		—
Total minimum lease payments	$	76	$	91

Contractual and Other Commercial Commitments. There has been no significant change in our contractual and other commercial commitments as described in the 2018 Annual Report. Our guarantees and product warranties are discussed in Note 9 of Notes to Condensed Consolidated Financial Statements (Unaudited).

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. In connection with the preparation of these financial statements, we are required to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosure of contingent liabilities. These assumptions, estimates and judgments are based on historical experience and assumptions that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. Our critical accounting policies are those that require assumptions to be made about matters that are highly uncertain. Different estimates could have a material impact on our financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions or circumstances. Our management periodically reviews these estimates and assumptions to ensure that our financial statements are presented fairly and are materially correct.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require significant management judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. With the exception of the adoption of ASC 842, the significant accounting policies and estimates that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are discussed in the 2018 Annual Report. Teradata’s senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the six months ended June 30, 2019. Refer to Note 12 of the Notes to the Condensed Consolidated Financial Statements for disclosures regarding estimates and judgments related to lease recognition.

New Accounting Pronouncements

See discussion in Note 2 of Notes to Condensed Consolidated Financial Statements (Unaudited) for new accounting pronouncements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have not been any material changes to the market risk factors previously disclosed in Part II, Item 7A of the Company’s 2018 Annual Report on Form 10-K.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Teradata maintains a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including, as appropriate, the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2019 our disclosure controls and procedures were effective to provide reasonable assurance that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II—OTHER INFORMATION

Item 1. Legal Proceedings.

On June 19, 2018, the Company and certain of its subsidiaries filed a lawsuit in the U.S. District Court for the Northern District of California against SAP SE, SAP America, Inc., and SAP Labs, LLC (collectively, “SAP”). In the lawsuit, the Company alleges, among other things, that SAP misappropriated certain of the Company’s trade secrets within the Company’s enterprise data analytics and warehousing products and used them to help develop, improve and introduce a competing product. The Company further alleges that SAP has committed copyright infringement and employed anticompetitive practices using its substantial market position in the enterprise resource planning applications market to pressure the Company’s customers and prospective customers to use SAP’s competing product and reduce or eliminate customers' and prospective customers' use of the Company's offerings. The Company seeks an injunction barring SAP’s alleged conduct, monetary damages, and other available legal and equitable relief. In July 2019, SAP filed patent infringement counterclaims against Teradata based on five SAP patents and we plan to vigorously defend against these counterclaims. Currently, it is not possible to determine the likelihood of a loss or a reasonably estimated range of loss, if any, pertaining to the counterclaims.

Item 1A. Risk Factors.

There have not been any material changes to the risk factors previously disclosed in Part I, Item IA of the Company's Annual Report on Form 10-K.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Purchase of Company Common Stock

Section 16 officers occasionally sell vested shares of restricted stock to the Company at the current market price to cover their withholding taxes. For the six months ended June 30, 2019, the total of these purchases was 114,177 shares at an average price of $46.04 per share.

The following table provides information relating to the Company’s share repurchase programs for the six months ended June 30, 2019:

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Dilution Offset Program (1)	Total Number of Shares Purchased as Part of Publicly Announced General Share Repurchase Program (2)	Maximum Dollar Value that May Yet Be Purchased Under the Dilution Offset Program		Maximum Dollar Value that May Yet Be Purchased Under the General Share Repurchase Program
Month
First Quarter Total	1,237,569	$	47.00	748,958	488,611	$	3,002,235	$	229,669,749
April 2019	469,999	$	44.48	68,398	401,601	$	2,510,526	$	211,761,976
May 2019	2,120,129	$	36.99	—	2,120,129	$	2,715,474	$	136,777,313
June 2019	491,077	$	35.68	110,423	380,654	$	1,482,900	$	119,767,910
Second Quarter Total	3,081,205	$	37.92	178,821	2,902,384	$	1,482,900	$	119,767,910

(1) The dilution offset program allows the Company to repurchase Teradata common stock to the extent of cash received from the exercise of stock options and the Teradata Employee Stock Purchase Plan (“ESPP”) to offset dilution from shares issued pursuant to these plans.

(2) The general share repurchase program authorized by the Board, allows the Company to repurchase outstanding shares of Teradata common stock. Share repurchases made by the Company are reported on a trade date basis. On July 28, 2019 Teradata's Board of Directors authorized an additional $500 million to be utilized to repurchase Teradata common stock under this share repurchase program. The Company now has a total of $620 million authorized for share repurchases under this share repurchase program.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

None

Item 5. Other Information.

None

39

Item 6. Exhibits.

Reference Number per Item 601 of Regulation S-K	Description
2.1	Form of Separation and Distribution Agreement between Teradata Corporation and NCR Corporation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K dated September 11, 2007 (SEC file number 001-33458)).
3.1	Amended and Restated Certificate of Incorporation of Teradata Corporation as amended and restated on September 24, 2007 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated September 25, 2007 (SEC file number 001-33458)).
3.2	Amended and Restated By-Laws of Teradata Corporation, as amended and restated on July 26, 2016 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated August 1, 2016).
4.1	Common Stock Certificate of Teradata Corporation (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q dated November 13, 2007 (SEC file number 001-33458)).
10.1*	Offer Letter between Scott A. Brown and the Company dated May 31, 2019.
10.2*	Offer Letter between Kathy Cullen-Cote and the Company dated on June 21, 2019.
31.1	Certification pursuant to Rule 13a-14(a), dated August 5, 2019.
31.2	Certification pursuant to Rule 13a-14(a), dated August 5, 2019.
32	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 5, 2019.
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of (Loss) Income for the three and six months period ended June 30, 2019 and 2018, (ii) the Condensed Consolidated Statements of Comprehensive Loss for the three and six months period ended June 30, 2019 and 2018, (iii) the Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018, (iv) the Condensed Consolidated Statements of Cash Flows for the six months period ended June 30, 2019 and 2018, (v) the Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months period ended June 30, 2019 and 2018 and (vi) the notes to the Condensed Consolidated Financial Statements.

* Management contracts or compensatory plans, contracts or arrangements.

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TERADATA CORPORATION
Date: August 5, 2019	By:	/s/ Mark A. Culhane
		Mark A.Culhane Chief Financial Officer

41

EX-10.1

PERSONAL AND CONFIDENTIAL May 31, 2019

Scott Brown

Dear Scott,

I am delighted to extend you this offer of employment with Teradata Corporation and its affiliates (“Teradata” or “Company”) as Chief Revenue Officer, based in the San Francisco Bay Area, and reporting to Oliver Ratzesberger, President and Chief Executive Officer.

This letter outlines the key elements of your compensation and related arrangements. Since your role will be as an executive officer with Teradata, all outlined compensation elements are subject to the review and formal approval of the Compensation and Human Resource Committee of Teradata’s Board of Directors (the “Committee”), and your appointment as an executive officer is subject to the review and formal approval by Teradata’s Board of Directors.

Base Salary: Your base salary will be paid at a rate of $550,000 on an annualized basis, less payroll deductions and withholdings, and paid on the Company’s normal payroll schedule.

Management Incentive Plan: You will be eligible to participate in Teradata’s Management Incentive Plan (the “MIP”), a performance-based annual incentive program for executive officers. Under the MIP, the Committee establishes an annual bonus program based upon financial and/or strategic performance results achieved by Teradata, as well as each eligible employee’s individual performance against their business objectives. We are recommending to the Committee that it approve an MIP target incentive opportunity of 100% of your eligible gross base salary, which would bring your total targeted annual compensation to $1,100,000. The period of your eligibility under the MIP will begin the first full month following your start date of employment, and your incentive opportunity will be pro-rated based upon the portion of your base salary earned during your eligibility period. Incentive awards are subject to discretionary adjustment by the Committee as outlined in the MIP and, if earned, are paid in the first calendar quarter following the program year.

Annual Equity Award (Performance-Based / Restricted Share Units): You will be eligible to participate in Teradata’s annual equity award program for executive officers. Annual awards are typically determined by the Committee in the first quarter each year and are generally compromised of a mixture of performance-based restricted share units (“PBRSUs”) and service-based restricted share units (“RSUs”). The precise nature of the award and vesting schedules will be determined by the Committee in its discretion. Teradata anticipates granting you an Annual Equity Award for 2019, consisting of PBRSUs and RSUs with a grant date value of $3,100,000, subject to approval by the Committee. This Annual Equity Award would be effective the 1^st of the month following your hire date. The grant would be split between PBRSUs (70%) and RSUs (30%), with the PBRSUs subject to a three (3)-year cliff vesting period and the RSUs vesting in three (3) equal annual installments. For clarity, going forward beginning in 2020, as CRO you will be granted annual equity awards under the Company’s annual equity award program for executive and such awards will not be pro-rated in value. The Annual Equity Award will be governed by the terms and conditions of the Teradata 2012 Stock Incentive Plan, as amended (“Plan”) and your PBRSU and RSU equity award agreements, which you will be required to accept in connection with the award. In addition, for avoidance of doubt, Teradata’s standard practice with respect to the settlement of PBRSU awards is to distribute any vested shares earned in connection with such awards promptly after the performance achievement is certified by the Committee in the first quarter following the end of the applicable performance period.

New Hire Grant Restricted Stock Unit Award: Subject to approval by the Committee, Teradata anticipates awarding you a one-time grant of service-based RSU’s with a grant value of $4,900,000 (“New Hire Grant”). The actual number of RSUs for your New Hire Grant will be determined by taking the value of the award on the effective date of grant and dividing it by the preceding 20-day average of Teradata stock but not including, the date of the grant (the “New Hire Equity Effective Date”). The New Hire Grant will vest in one-third increments on each anniversary of the New Hire Equity

Effective Date until vested in full at the end of a three-year period, subject to your continued employment with Teradata on each applicable vesting date and other terms and conditions set forth in the Plan and your equity award agreement.

Stock Ownership Guidelines: Executive positions are subject to Teradata's Stock Ownership Guidelines holding requirement as established by the Committee (currently, 35,000 shares), which are subject to change from time to time in the Committee’s discretion.

Officer/Executive Severance Plan and Change in Control: We will recommend to the Committee that you be eligible to participate as a Level I participant in the Teradata Executive Severance Plan (the “ESP”) and as a participant under the Teradata Change in Control Severance Plan (the “CIC Plan”). We anticipate that you would be designated by the Committee as an eligible participant in both plans effective upon your start date of employment with Teradata; however, each plan is subject to amendment or termination by Teradata in accordance with the terms of each plan, and your participation in the ESP is subject to your signing a participation agreement under the ESP. A copy of each plan, as well as the participation agreement for the ESP, will be provided to you under separate cover.

Travel: Although your primary work location will be in the San Francisco Bay Area when you are not otherwise traveling for business, you will be expected to spend such time as necessary at Teradata’s office in San Diego and, as with any other business travel, any expenses associated with your work in San Diego or otherwise will be reimburseable as a Company business expense. Such expenses include the cost of airfare, lodging, and a rental car or ride services. Travel expenses will be reimbursed upon receipt, in accordance with the Company’s Travel and Expense Policy. In addition, in connection with any business travel for the Company, notwithstanding anything to the contrary in the company’s travel and expense policy, for medical reasons, you will be permitted to fly business class for flights of any duration whether internationally or domestically.

Outside Board Service: Upon approval by Teradata’s Chief Executive Officer, you will be permitted to serve as an outside director on the board of another company and a board observer for at least one other outside company; provided, however, that such companies do not compete with Teradata and that such service complies with Teradata’s policies and applicable law and does not interfere with your responsibilities and duties for the Company.

Tax Matters: Teradata agrees to reasonably cooperate with you to amend your offer letter to the extent you deem necessary to avoid imposition of any additional tax under Section 409A of the Internal Revenue Code, as amended, but only to the extent such amendment would not have a more than de minimis adverse effect on Teradata and is approved by the Committee. Notwithstanding any other provision of your offer letter, Teradata may withhold from any amounts payable hereunder, or any other benefits received pursuant hereto, such minimum federal, state and/or local taxes as shall be required to be withheld under any applicable law or regulation.

Benefits: As an employee of the Company, you will be eligible to participate in the standard benefit plans offered to similarly situated employees by Teradata from time to time, subject to plan terms and generally applicable company policies. A full description of these benefits is available for your review. Teradata may change its benefit programs from time to time in its discretion.

By accepting this offer of at-will employment, you agree to the Conditions of Employment outlined in Attachment A, including but not limited to the restriction of disclosure of any trade secret or confidential/proprietary information during your employment at Teradata, satisfactory outcome of background and reference checks, and proof of identity and legal authorization to work.

This letter, together with Attachment A and your Employee Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement of your employment agreement with Teradata. It supersedes any other agreements or promises made to you by anyone, whether oral or written. Changes in your employment terms, other than those changes expressly reserved to Teradata’s discretion in this letter, require a written modification signed by an officer of Teradata.

Scott, we are excited to provide this offer and look forward to the contributions you will bring to the Teradata team; I hope you share this enthusiasm. This offer will remain effective until June 2, 2019 and assumes a start date of June 17, 2019 if not sooner. The final offer letter and new hire documents are processed through our on-line portal which allows electronic signature; a copy of this offer letter and the new hire documents will be delivered through the portal for your review and approval following a verbal acceptance.

If you have any questions regarding the details of this offer, please do not hesitate to contact me.

Sincerely,

Oliver Ratzesberger

President & Chief Executive Officer    /s/ Scott A. Brown

ATTACHMENT A

CONDITIONS OF EMPLOYMENT

Teradata requires employment candidates to successfully complete various employment documentation and processes. This offer of employment is conditioned upon your satisfying and agreeing to the criteria outlined below. You agree to assist as needed and to complete any documentation at the Company’s request to meet these conditions. You assume any and all risks associated with terminating any prior or current employment or making any financial or personal commitments based upon Teradata’s conditional offer.

Pre-employment Background and Reference Checks: This offer of employment is conditioned upon successful completion of a background and reference checks. By accepting this offer and these conditions you will agree to provide Teradata permission to conduct both of these checks and release the results to Teradata designated officials. Following acceptance of the offer you will receive an e-mail with the subject Action Required to Complete Background Check for Teradata Employment with a link to initiate the background check process. Please submit your information within three days of receipt of the link.

U.S. Employment Eligibility. As required by federal law, you must provide satisfactory proof of your right to work in the United States. You will be required to complete an I-9 form and submit acceptable documentation (as noted in the I-9 form) verifying your identity and work authorization within three (3) days of your employment start date.

Confidential Information. You must read, execute, and agree to abide by Teradata’s Employee Confidential Information and Invention Assignment Agreement, which prohibits unauthorized use or disclose of Teradata’s proprietary information, among other obligations.

Mutual Agreement to Arbitrate. You must read, execute, and agree to abide by Teradata’s Mutual Agreement to Arbitrate all Employment Related Claims, which provides for final and binding arbitration of any unresolved employment-related disputes that may arise between you and Teradata.

Code of Conduct & Conflicts of Interest Certifications. You agree to read and abide by Teradata’s Code of Conduct and to disclose in writing all actual and potential conflicts of interest which pertain to you. Teradata’s Code of Conduct, which includes the contact information for Teradata’s Ethics Helpline, will be provided to you on your first day of employment, and can also be accessed here:https://assets.teradata.com/pdf/Code-of-Conduct.pdf. You will be required to take Teradata’s Code of Conduct training and certify in writing your commitment to reading and complying with the Code of Conduct and disclosing all conflicts in interest no later than thirty (30) days after your employment start date. An email with a link to the training will be sent you on or shortly after your start date of employment.

No Employment Restrictions. By accepting and signing this document, you certify to Teradata that you are not subject to any restrictions by virtue of any prior employment which would preclude or restrict you from performing the position being offered in this letter, such as non-competition, non-solicitation, or other work-related restrictions. This offer is further conditioned upon Teradata confirming that there are no export restrictions applicable to your employment

No Improper Use of Information of Prior Employers and Others. Teradata respects the intellectual property rights of other companies. You should not bring with you to your Teradata position any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality, nor in any other way disclose or use such information while employed by Teradata. Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by Teradata. Your managers and colleagues will be instructed to not accept any such confidential information of another company, and you will be subject to discipline up to and including termination of employment for disclosure of such information.

Employment At Will. This document reflects the general description of the terms and conditions of your employment with Teradata. Teradata has in place other policies which govern your employment relationship with Teradata, which it may change from time-to-time in its discretion. Your offer letter, this attachment, and these policies are not a contract of employment for any definite duration of time. Your employment at Teradata will be “at-will”, meaning either you or Teradata have the right to discontinue the employment relationship with or without cause at any time and for any reason whatsoever. Your employment at-will status can only be modified in a written agreement signed by you and by an officer of Teradata.

EX-10.2

PERSONAL AND CONFIDENTIAL

June 21, 2019    /s/ Kathy Cullen-Cote

Kathy Cullen-Cote

Dear Kathy,

I am delighted to extend you this offer of employment with Teradata Corporation and its affiliates (“Teradata” or “Company”) as Chief Human Resources Officer, based in San Diego, and reporting to Oliver Ratzesberger, President and Chief Executive Officer.

This letter outlines the key elements of your compensation and related arrangements. Since your role will be as an executive officer with Teradata, all outlined compensation elements are subject to the review and formal approval of the Compensation and Human Resource Committee of Teradata’s Board of Directors (the “Committee”), and your appointment as an executive officer is subject to the review and formal approval by Teradata’s Board of Directors.

Base Salary: Your base salary will be paid at a rate of $450,000on an annualized basis, less payroll deductions and withholdings, and paid on the Company’s normal payroll schedule.

Management Incentive Plan: You will be eligible to participate in Teradata’s Management Incentive Plan (the “MIP”), a performance-based annual incentive program for executive officers. Under the MIP, the Committee establishes an annual bonus program based upon financial and/or strategic performance results achieved by Teradata, as well as each eligible employee’s individual performance against their business objectives. We are recommending to the Committee that it approve an MIP target incentive opportunity of 80% of your eligible gross base salary, which would bring your total targeted annual incentive compensation to $360,000. The period of your eligibility under the MIP will begin the first full month following your start date of employment, and your incentive opportunity will be pro-rated based upon the portion of your base salary earned during your eligibility period. Incentive awards are subject to discretionary adjustment by the Committee as outlined in the MIP and, if earned, are paid in the first calendar quarter following the program year.

Annual Equity Award (Performance-Based / Restricted Share Units): You will be eligible to participate in Teradata’s annual equity award program for executive officers. Annual awards are typically determined by the Committee in the first quarter each year and are generally compromised of a mixture of performance-based restricted share units (“PBRSUs”) and service-based restricted share units (“RSUs”). The precise nature of the award and vesting schedules will be determined by the Committee in its discretion. Teradata anticipates granting you an Annual Equity Award for 2019, consisting of PBRSUs and RSUs with a grant date value of $2,200,000, subject to approval by the Committee. This Annual Equity Award would be effective the 1^st of the month following your hire date. The grant would be split between PBRSUs (70%) and RSUs (30%), with the PBRSUs subject to a three (3)-year cliff vesting period and the RSUs vesting in three (3) equal annual installments. For clarity, going forward beginning in 2020, you will be granted annual equity awards under the Company’s annual equity award program for executive and such awards will not be pro-rated in value. The Annual Equity Award will be governed by the terms and conditions of the Teradata 2012 Stock Incentive Plan, as amended (“Plan”) and your PBRSU and RSU equity award agreements, which you will be required to accept in connection with the award. In addition, for avoidance of doubt, Teradata’s standard practice with respect to the settlement of PBRSU awards is to distribute any vested shares earned in connection with such awards promptly after the performance achievement is certified by the Committee in the first quarter following the end of the applicable performance period.

New Hire Grant Restricted Stock Unit Award: Subject to approval by the Committee, Teradata anticipates awarding you a one-time grant of service-based RSU’s with a grant value of $2,200,000(“New Hire Grant”). The actual number of RSUs for your New Hire Grant will be determined by taking the value of the award on the effective date of grant and dividing it by the preceding 20-day average of Teradata stock but not including, the date of the grant (the “New Hire Equity Effective Date”). The New Hire Grant will vest in one-third increments on each anniversary of the New Hire Equity

Effective Date until vested in full at the end of a three-year period, subject to your continued employment with Teradata on each applicable vesting date and other terms and conditions set forth in the Plan and your equity award agreement.

Cash Signing Bonus:You are eligible to receive a one-time cash signing bonus in the amount of $300,000, minus applicable taxes and withholdings. This sum is payable in the first payroll cycle after you have completed thirty (30) days of continuous and satisfactory employment with Teradata. However, your signing bonus is not considered earned until you have completed twelve (12) continuous months of employment with Teradata.

If your employment is terminated for Cause or if you terminate your employment for any reason between twelve (12) and twenty-four (24) months of employment of your first day of employment with Teradata, you agree to repay $100,000 of the signing bonus, and Teradata may withhold these sums from any compensation otherwise due you. For purposes of this agreement, “Cause” shall have the same definition set forth in Teradata’s 2012 Stock Incentive Plan.

Stock Ownership Guidelines: Executive positions are subject to Teradata's Stock Ownership Guidelines holding requirement as established by the Committee (currently, 35,000 shares), which are subject to change from time to time in the Committee’s discretion.

Officer/Executive Severance Plan and Change in Control: We will recommend to the Committee that you be eligible to participate as a Level I participant in the Teradata Executive Severance Plan (the “ESP”) and as a participant under the Teradata Change in Control Severance Plan (the “CIC Plan”). We anticipate that you would be designated by the Committee as an eligible participant in both plans effective upon your start date of employment with Teradata; however, each plan is subject to amendment or termination by Teradata in accordance with the terms of each plan, and your participation in the ESP is subject to your signing a participation agreement under the ESP. A copy of each plan, as well as the participation agreement for the ESP, will be provided to you under separate cover.

Relocation: It is currently expected that, after an initial two (2) year period, you will be relocated under a managed move and eligible for reimbursement of up to $200,000 for moving and relocations expenses that are incurred during your relocation. Relocation expenses covered include: a return house hunting trip to San Diego for you and your immediate family, lodging, transportation, and household goods shipping, shipment of 2 cars, and 30 days of temporary housing prior to your formal relocation. You must complete the necessary expense forms, pursuant to Teradata’s expense reimbursement policies and procedures, within thirty (30) days of incurring the associated expense. Upon mutual agreement concerning the exact timing of your relocation after the initial two (2) year period after you start employment with Teradata, your relocation process will be initiated, and a relocation counselor will be in contact with you to discuss your personal relocation needs. You should not incur any relocation expenses or initiate any relocation plans until you have discussed your situation with your assigned relocation counselor. If: (i) your employment is terminated by Teradata for Cause, or (ii) you terminate your employment for any reason, in either case within two (2) years of the date of first disbursement of any relocation monies or the completion of your relocation (whichever is later), you will be required to repay to Teradata the full relocation costs and any relocation expenses paid to you or on your behalf, and Teradata may withhold these sums from any compensation otherwise due you, consistent with applicable law. If you voluntarily cancel your relocation for any reason, you must repay all relocation reimbursements and allowances provided during the relocation process, including all expenses which were billed directly to Teradata.

Travel Allowance: Because you are generally expected to work from Teradata’s office in San Diego when you are not otherwise traveling for business, subject to Committee approval, you will be eligible to commute to San Diego as a company business expense. Such benefits include commuting cost of airfare, lodging and a rental car or ride services. Travel expenses will be reimbursed upon receipt, in accordance with the Company’s Travel and Expense Policy not to exceed $5,000 per month. The Company will not assume any liability for lease agreements should you wish to lease an apartment. You shall be responsible for payment of all applicable income tax in connection with such expenses directly paid for by the Company or reimbursed to you by the Company.

Tax Matters: Teradata agrees to reasonably cooperate with you to amend your offer letter to the extent you deem necessary to avoid imposition of any additional tax under Section 409A of the Internal Revenue Code, as amended, but only to the extent such amendment would not have a more than de minimis adverse effect on Teradata and is approved by the Committee. Notwithstanding any other provision of your offer letter, Teradata may withhold from any amounts payable hereunder, or any other benefits received pursuant hereto, such minimum federal, state and/or local taxes as shall be required to be withheld under any applicable law or regulation.

Benefits: As an employee of the Company, you will be eligible to participate in the standard benefit plans offered to similarly situated employees by Teradata from time to time, subject to plan terms and generally applicable company policies. A full description of these benefits is available for your review. Teradata may change its benefit programs from time to time in its discretion.

By accepting this offer of at-will employment, you agree to the Conditions of Employment outlined in Attachment A, including but not limited to the restriction of disclosure of any trade secret or confidential/proprietary information during

your employment at Teradata, satisfactory outcome of background and reference checks, and proof of identity and legal authorization to work.

This letter, together with Attachment A and your Employee Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement of your employment agreement with Teradata. It supersedes any other agreements or promises made to you by anyone, whether oral or written. Changes in your employment terms, other than those changes expressly reserved to Teradata’s discretion in this letter, require a written modification signed by an officer of Teradata.

Kathy, we are excited to provide this offer and look forward to the contributions you will bring to the Teradata team; I hope you share this enthusiasm. This offer will remain effective until June 25 2019and assumes a start date of July 29, 2019 if not sooner. The final offer letter and new hire documents are processed through our on-line portal which allows electronic signature; a copy of this offer letter and the new hire documents will be delivered through the portal for your review and approval following a verbal acceptance.

If you have any questions regarding the details of this offer, please do not hesitate to contact me. Sincerely,

Oliver Ratzesberger

President & Chief Executive Officer

ATTACHMENT A

CONDITIONS OF EMPLOYMENT

Teradata requires employment candidates to successfully complete various employment documentation and processes. This offer of employment is conditioned upon your satisfying and agreeing to the criteria outlined below. You agree to assist as needed and to complete any documentation at the Company’s request to meet these conditions. You assume any and all risks associated with terminating any prior or current employment or making any financial or personal commitments based upon Teradata’s conditional offer.

Pre-employment Background and Reference Checks: This offer of employment is conditioned upon successful completion of a background and reference checks. By accepting this offer and these conditions you will agree to provide Teradata permission to conduct both of these checks and release the results to Teradata designated officials. Following acceptance of the offer you will receive an e-mail with the subject Action Required to Complete Background Check for Teradata Employment with a link to initiate the background check process. Please submit your information within three days of receipt of the link.

U.S. Employment Eligibility. As required by federal law, you must provide satisfactory proof of your right to work in the United States. You will be required to complete an I-9 form and submit acceptable documentation (as noted in the I-9 form) verifying your identity and work authorization within three (3) days of your employment start date.

Confidential Information. You must read, execute, and agree to abide by Teradata’s Employee Confidential Information and Invention Assignment Agreement, which prohibits unauthorized use or disclose of Teradata’s proprietary information, among other obligations.

Mutual Agreement to Arbitrate. You must read, execute, and agree to abide by Teradata’s Mutual Agreement to Arbitrate all Employment Related Claims, which provides for final and binding arbitration of any unresolved employment-related disputes that may arise between you and Teradata.

Code of Conduct & Conflicts of Interest Certifications. You agree to read and abide by Teradata’s Code of Conduct and to disclose in writing all actual and potential conflicts of interest which pertain to you. Teradata’s Code of Conduct, which includes the contact information for Teradata’s Ethics Helpline, will be provided to you on your first day of employment, and can also be accessed here:https://assets.teradata.com/pdf/Code-of-Conduct.pdf. You will be required to take Teradata’s Code of Conduct training and certify in writing your commitment to reading and complying with the Code of Conduct and disclosing all conflicts in interest no later than thirty (30) days after your employment start date. An email with a link to the training will be sent you on or shortly after your start date of employment.

No Employment Restrictions. By accepting and signing this document, you certify to Teradata that you are not subject to any restrictions by virtue of any prior employment which would preclude or restrict you from performing the position being offered in this letter, such as non-competition, non-solicitation, or other work-related restrictions. This offer is further conditioned upon Teradata confirming that there are no export restrictions applicable to your employment

No Improper Use of Information of Prior Employers and Others. Teradata respects the intellectual property rights of other companies. You should not bring with you to your Teradata position any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality, nor in any other way disclose or use such information while employed by Teradata. Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by Teradata. Your managers and colleagues will be instructed to not accept any such confidential information of another company, and you will be subject to discipline up to and including termination of employment for disclosure of such information.

Employment At Will. This document reflects the general description of the terms and conditions of your employment with Teradata. Teradata has in place other policies which govern your employment relationship with Teradata, which it may change from time-to-time in its discretion. Your offer letter, this attachment, and these policies are not a contract of employment for any definite duration of time. Your employment at Teradata will be “at-will”, meaning either you or Teradata have the right to discontinue the employment relationship with or without cause at any time and for any reason whatsoever. Your employment at-will status can only be modified in a written agreement signed by you and by an officer of Teradata.

EX-31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECURITIES

EXCHANGE ACT RULE 13a-14

I, Oliver Ratzesberger, certify that:

I have reviewed this quarterly report on Form 10-Q of Teradata Corporation;

1.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

2.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

3.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

4. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2019	/s/ Oliver Ratzesberger
	Oliver Ratzesberger
	President and Chief Executive Officer

EX-31.2

I, Mark A. Culhane, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Teradata Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2019	/s/ Mark A. Culhane
	Mark A. Culhane
	Chief Financial Officer

EX-32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Teradata Corporation, a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2019 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company does hereby certify, pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002), that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification (i) is given to such officers’ knowledge, based upon such officers’ investigation as such officers reasonably deem appropriate; and (ii) is being furnished solely pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002) and is not being filed as part of the Report or as a separate disclosure document.

Dated: August 5, 2019	/s/ Oliver G. Ratzesberger
	Oliver G. Ratzesberger
	President and Chief Executive Officer
Dated: August 5, 2019	/s/ Mark A. Culhane
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Teradata Corporation and will be retained by Teradata Corporation and furnished to the United States Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information Document - shares shares in Millions	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	001-33458
Entity Registrant Name	TERADATA CORP /DE/
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	75-3236470
Entity Address, Address Line One	17095 Via Del Campo
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92127
City Area Code	866
Local Phone Number	548-8348
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		114.1
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000816761
Current Fiscal Year End Date	--12-31
NEW YORK STOCK EXCHANGE, INC. [Member]
Entity Information [Line Items]
Title of each class:	Common Stock, $0.01 par value
Trading Symbol	TDC
Name of Each Exchange on which Registered:	NYSE

XML

Condensed Consolidated Statements of (Loss) Income (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue
Revenue	$ 478	$ 544	$ 946	$ 1,050
Cost of revenue
Cost of goods and services sold	242	294	486	577
Gross profit	236	250	460	473
Operating expenses
Selling, general and administrative expenses	145	163	296	315
Research and development expenses	81	77	159	152
Total operating expenses	226	240	455	467
Income from operations	10	10	5	6
Interest expense	(8)	(5)	(17)	(10)
Interest income	6	4	12	7
Other expense	(3)	(3)	(5)	(5)
Total other expense, net	(5)	(4)	(10)	(8)
Income (loss) before income taxes	5	6	(5)	(2)
Income tax expense	6	2	6	1
Net (loss) income	$ (1)	$ 4	$ (11)	$ (3)
Net (loss) income per common share
Basic (in dollars per share)	$ (0.01)	$ 0.03	$ (0.09)	$ (0.02)
Diluted (in dollars per share)	$ (0.01)	$ 0.03	$ (0.09)	$ (0.02)
Weighted average common shares outstanding
Basic (in shares)	115.5	119.5	116.3	120.4
Diluted (in shares)	115.5	121.5	116.3	120.4
Recurring
Revenue
Revenue	$ 338	$ 312	$ 669	$ 614
Cost of revenue
Cost of goods and services sold	107	88	213	178
Perpetual software licenses and hardware
Revenue
Revenue	29	97	60	166
Cost of revenue
Cost of goods and services sold	26	73	51	121
Consulting services
Revenue
Revenue	111	135	217	270
Cost of revenue
Cost of goods and services sold	$ 109	$ 133	$ 222	$ 278

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (1)	$ 4	$ (11)	$ (3)
Other comprehensive loss:
Foreign currency translation adjustments	(1)	(21)	(7)	(17)
Derivatives:
Unrealized loss on derivatives, before tax	(9)	(3)	(13)	(3)
Unrealized loss on derivatives, tax portion	2	0	3	0
Unrealized loss on derivatives, net of tax	(7)	(3)	(10)	(3)
Defined benefit plans:
Defined benefit plan adjustment, before tax	1	4	2	4
Defined benefit plan adjustment, tax portion	0	(1)	0	(1)
Defined benefit plan adjustment, net of tax	1	3	2	3
Other comprehensive loss	(7)	(21)	(15)	(17)
Comprehensive loss	$ (8)	$ (17)	$ (26)	$ (20)

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 635	$ 715
Accounts receivable, net	377	588
Inventories	35	28
Other current assets	82	97
Total current assets	1,129	1,428
Property and equipment, net	317	295
Capitalized software, net	49	72
Right of use assets - operating lease, net	58	0
Goodwill	396	395
Acquired intangible assets, net	12	16
Deferred income taxes	70	67
Other assets	92	87
Total assets	2,123	2,360
Current liabilities
Current portion of long-term debt	25	19
Current portion of finance lease liability	32	17
Current portion of operating lease liability	20	0
Accounts payable	102	141
Payroll and benefits liabilities	114	224
Deferred revenue	498	490
Other current liabilities	74	118
Total current liabilities	865	1,009
Long-term debt	466	478
Finance lease liability	54	30
Operating lease liability	44	0
Pension and other postemployment plan liabilities	102	113
Long-term deferred revenue	82	105
Deferred tax liabilities	4	3
Other liabilities	139	127
Total liabilities	1,756	1,865
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	0	0
Common stock: par value $0.01 per share, 500.0 shares authorized, 114.1 and 116.8 shares issued at June 30, 2019 and December 31, 2018, respectively	1	1
Paid-in capital	1,491	1,418
Accumulated deficit	(1,009)	(823)
Accumulated other comprehensive loss	(116)	(101)
Total stockholders’ equity	367	495
Total liabilities and stockholders’ equity	$ 2,123	$ 2,360

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	100,000,000.0	100,000,000.0
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000,000.0	500,000,000.0
Common stock, shares issued (in shares)	114,100,000	116,800,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Net (loss) income	$ (11)	$ (3)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	77	64
Stock-based compensation expense	37	35
Deferred income taxes	0	(6)
Changes in assets and liabilities:
Receivables	211	185
Inventories	(7)	2
Current payables and accrued expenses	(155)	(31)
Deferred revenue	(15)	90
Other assets and liabilities	(33)	(46)
Net cash provided by operating activities	104	290
Investing activities
Expenditures for property and equipment	(27)	(58)
Additions to capitalized software	(2)	(4)
Net cash used in investing activities	(29)	(62)
Financing activities
Repurchases of common stock	(175)	(157)
Repayments of long-term borrowings	(6)	(40)
Repayments of credit facility borrowings	0	(240)
Payments of finance leases	(9)	0
Other financing activities, net	36	18
Net cash used in financing activities	(154)	(419)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0	(15)
Decrease in cash, cash equivalents and restricted cash	(79)	(206)
Cash, cash equivalents and restricted cash at beginning of period	716	1,089
Cash, cash equivalents and restricted cash at end of period	637	883
Supplemental cash flow disclosure:
Assets acquired under operating lease	4	0
Assets acquired under finance lease	48	0
Total cash, cash equivalents and restricted cash	$ 637	$ 1,089

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) shares in Millions, $ in Millions	Total	Common Stock	Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)
Shares issued, beginning balance (in shares) at Dec. 31, 2017		122
Stockholders’ equity, beginning balance at Dec. 31, 2017	$ 668	$ 1	$ 1,320	$ (579)	$ (74)
Net (loss) income	(7)			(7)
Employee stock compensation, employee stock purchase programs and option exercises (in shares)		1
Employee stock compensation, employee stock purchase programs and option exercises	30		30
Repurchases of common stock, retired (in shares)		(2)
Repurchases of common stock, retired	(77)			(77)
Currency translation adjustment	4				4
Shares issued, beginning balance (in shares) at Mar. 31, 2018		121
Stockholders’ equity, ending balance at Mar. 31, 2018	644	$ 1	1,350	(637)	(70)
Shares issued, beginning balance (in shares) at Dec. 31, 2017		122
Stockholders’ equity, beginning balance at Dec. 31, 2017	668	$ 1	1,320	(579)	(74)
Net (loss) income	(3)
Pension and postemployment benefit plans, net of tax	3
Currency translation adjustment	(17)
Shares issued, beginning balance (in shares) at Jun. 30, 2018		119
Stockholders’ equity, ending balance at Jun. 30, 2018	572	$ 1	1,376	(714)	(91)
Shares issued, beginning balance (in shares) at Mar. 31, 2018		121
Stockholders’ equity, beginning balance at Mar. 31, 2018	644	$ 1	1,350	(637)	(70)
Net (loss) income	4			4	0
Employee stock compensation, employee stock purchase programs and option exercises	26		26
Repurchases of common stock, retired (in shares)		(2)
Repurchases of common stock, retired	(81)			(81)
Pension and postemployment benefit plans, net of tax	3			0	3
Unrealized loss on derivatives, net of tax	(3)				(3)
Currency translation adjustment	(21)				(21)
Shares issued, beginning balance (in shares) at Jun. 30, 2018		119
Stockholders’ equity, ending balance at Jun. 30, 2018	572	$ 1	1,376	(714)	(91)
Shares issued, beginning balance (in shares) at Dec. 31, 2018		117
Stockholders’ equity, beginning balance at Dec. 31, 2018	495	$ 1	1,418	(823)	(101)
Net (loss) income	(10)			(10)
Employee stock compensation, employee stock purchase programs and option exercises (in shares)		1
Employee stock compensation, employee stock purchase programs and option exercises	48		48
Repurchases of common stock, retired (in shares)		(1)
Repurchases of common stock, retired	(58)			(58)
Pension and postemployment benefit plans, net of tax	1				1
Unrealized loss on derivatives, net of tax	(3)				(3)
Currency translation adjustment	(6)				(6)
Shares issued, beginning balance (in shares) at Mar. 31, 2019		117
Stockholders’ equity, ending balance at Mar. 31, 2019	467	$ 1	1,466	(891)	(109)
Shares issued, beginning balance (in shares) at Dec. 31, 2018		117
Stockholders’ equity, beginning balance at Dec. 31, 2018	495	$ 1	1,418	(823)	(101)
Net (loss) income	(11)
Pension and postemployment benefit plans, net of tax	2
Currency translation adjustment	(7)
Shares issued, beginning balance (in shares) at Jun. 30, 2019		114
Stockholders’ equity, ending balance at Jun. 30, 2019	367	$ 1	1,491	(1,009)	(116)
Shares issued, beginning balance (in shares) at Mar. 31, 2019		117
Stockholders’ equity, beginning balance at Mar. 31, 2019	467	$ 1	1,466	(891)	(109)
Net (loss) income	(1)			(1)
Employee stock compensation, employee stock purchase programs and option exercises	25		25
Repurchases of common stock, retired (in shares)		(3)
Repurchases of common stock, retired	(117)			(117)
Pension and postemployment benefit plans, net of tax	1				1
Unrealized loss on derivatives, net of tax	(7)				(7)
Currency translation adjustment	(1)				(1)
Shares issued, beginning balance (in shares) at Jun. 30, 2019		114
Stockholders’ equity, ending balance at Jun. 30, 2019	$ 367	$ 1	$ 1,491	$ (1,009)	$ (116)

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

These statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows of Teradata Corporation (“Teradata” or the “Company”) for the interim periods presented herein. The year-end 2018 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates.  

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Teradata’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Annual Report”). The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year. Prior period amounts have been restated to conform to the current year presentation, except for lease accounting discussed in Notes 2 and 12.

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New Accounting Pronouncements

6 Months Ended

Jun. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

Fair Value Measurement.  In August 2018, the Financial Accounting Standards Board ("FASB") issued new guidance that modifies disclosure requirements related to fair value measurement. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this update while delaying adoption of the additional disclosures until their effective date. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Compensation-Retirement Benefits-Defined Benefit Plans-General. In August 2018, the FASB issued new guidance that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2020, with early adoption permitted, and is to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. In August 2018, the FASB issued new guidance that reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). For public companies, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The effects of this standard on our financial position, results of operations or cash flows are not expected to be material.

Codification Improvements to Financial Instruments-Credit Losses, Derivatives and Hedging, and Financial Instruments. In June 2016, the FASB issued Accounting Standards, Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. Since the

issuance of this accounting standard, the Board has identified certain areas that require clarification and improvement. In May 2019, the FASB issued guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets measured at amortized cost (except held-to-maturity securities) using the fair value option. The election is to be applied on an instrument-by-instrument basis. For entities that have already adopted the new credit losses standard, the relief is effective for fiscal years beginning after December 15, 2019 and interim periods therein, and early adoption is permitted. For all other entities, the guidance is effective upon adoption of the new credit losses standard. The company is currently evaluating this new guidance to determine the impact it may have on our financial position, results of operations or cash flows.

Recently Adopted Guidance

Leases. In February 2016, the FASB issued new guidance under Topic 842, which requires a lessee to account for leases as finance or operating leases. Both types of leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement and cash flow recognition. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Entities will classify leases to determine how to recognize lease-related revenue and expense. We adopted the new standard as of January 1, 2019 using the modified retrospective adoption approach utilizing the optional transition method with prior periods not recast and have elected certain of the practical expedients allowed under the standard. The Condensed Consolidated Financial Statements for the three and six months ended June 30, 2019 are presented under the new standard, while comparative years presented are not adjusted and continue to be reported in accordance with our historical accounting policy. See Note 12 for more information.

Comprehensive Income. In February 2018, the FASB issued new guidance for Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02), which allows companies to reclassify stranded tax effects resulting from the Tax Reform Act from accumulated other comprehensive income to retained earnings. The impact of applying this standard did not have a material impact on our condensed consolidated financial statements.

Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. In June 2018, the FASB issued new guidance to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments are intended to assist entities in evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) or as exchange (reciprocal) transactions and determining whether a contribution is conditional. The Company adopted this guidance on January 1, 2019, which did not have a material impact on our condensed consolidated financial statements.

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Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer

Revenue from Contracts with Customers

Disaggregation of Revenue from Contracts with Customers

The following table presents a disaggregation of revenue:

	Three months ended June 30,				Six months ended June 30,
in millions	2019		2018		2019		2018
Americas
Recurring	$	217	$	199	$	430	$	392
Perpetual software licenses and hardware	12		40		31		62
Consulting services	40		48		77		97
Total Americas	269		287		538		551
EMEA
Recurring	75		70		148		137
Perpetual software licenses and hardware	10		10		17		43
Consulting services	37		47		70		96
Total EMEA	122		127		235		276
APAC
Recurring	46		43		91		85
Perpetual software licenses and hardware	7		47		12		61
Consulting services	34		40		70		77
Total APAC	87		130		173		223
Total Revenue	$	478	$	544	$	946	$	1,050

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the condensed consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:

	As of
in millions	June 30, 2019		December 31, 2018
Accounts receivable, net	$	377	$	588
Contract assets	$	6	$	14
Current deferred revenue	$	498	$	490
Long-term deferred revenue	$	82	$	105

Revenue recognized during the six months ended June 30, 2019 from amounts included in deferred revenue at the beginning of the period was $402 million.

Transaction Price Allocated to Unsatisfied Obligations

The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at June 30, 2019:

in millions	Total at June 30, 2019		Year 1		Year 2 and Thereafter
Remaining unsatisfied obligations	$	2,530	$	1,182	$	1,348

The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,636 million of the amount includes customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us. The Company expects to recognize revenue of approximately $437 million in the next year from contracts that are non-cancelable. Customers typically do not cancel before the end of the contractual term and historically the Company has seen very little churn in its customer base. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.Contract Costs

The Company capitalizes sales commissions and other contract costs that are incremental direct costs of obtaining customer contracts if the expected amortization period of the asset is greater than one year. These costs are recorded in Other Assets on the Company’s balance sheet. The capitalized amounts are calculated based on the annual recurring revenue and total contract value for individual multi-term contracts. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as selling, general and administrative expenses on a straight-line basis over the expected period of benefit, which is typically around four years. These costs are periodically reviewed for impairment. The following table identifies the activity relating to capitalized contract costs:

in millions	December 31, 2018	Capitalized	Amortization		June 30, 2019
Capitalized contract costs	54	17	(8	)	63

XML

Contract Costs

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Contract Costs

Revenue from Contracts with Customers

Disaggregation of Revenue from Contracts with Customers

The following table presents a disaggregation of revenue:

	Three months ended June 30,				Six months ended June 30,
in millions	2019		2018		2019		2018
Americas
Recurring	$	217	$	199	$	430	$	392
Perpetual software licenses and hardware	12		40		31		62
Consulting services	40		48		77		97
Total Americas	269		287		538		551
EMEA
Recurring	75		70		148		137
Perpetual software licenses and hardware	10		10		17		43
Consulting services	37		47		70		96
Total EMEA	122		127		235		276
APAC
Recurring	46		43		91		85
Perpetual software licenses and hardware	7		47		12		61
Consulting services	34		40		70		77
Total APAC	87		130		173		223
Total Revenue	$	478	$	544	$	946	$	1,050

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the condensed consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:

	As of
in millions	June 30, 2019		December 31, 2018
Accounts receivable, net	$	377	$	588
Contract assets	$	6	$	14
Current deferred revenue	$	498	$	490
Long-term deferred revenue	$	82	$	105

Revenue recognized during the six months ended June 30, 2019 from amounts included in deferred revenue at the beginning of the period was $402 million.

Transaction Price Allocated to Unsatisfied Obligations

The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at June 30, 2019:

in millions	Total at June 30, 2019		Year 1		Year 2 and Thereafter
Remaining unsatisfied obligations	$	2,530	$	1,182	$	1,348

The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,636 million of the amount includes customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us. The Company expects to recognize revenue of approximately $437 million in the next year from contracts that are non-cancelable. Customers typically do not cancel before the end of the contractual term and historically the Company has seen very little churn in its customer base. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.Contract Costs

The Company capitalizes sales commissions and other contract costs that are incremental direct costs of obtaining customer contracts if the expected amortization period of the asset is greater than one year. These costs are recorded in Other Assets on the Company’s balance sheet. The capitalized amounts are calculated based on the annual recurring revenue and total contract value for individual multi-term contracts. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as selling, general and administrative expenses on a straight-line basis over the expected period of benefit, which is typically around four years. These costs are periodically reviewed for impairment. The following table identifies the activity relating to capitalized contract costs:

in millions	December 31, 2018	Capitalized	Amortization		June 30, 2019
Capitalized contract costs	54	17	(8	)	63

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Supplemental Financial Information

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supplemental Financial Information

Supplemental Financial Information

	As of
In millions	June 30, 2019		December 31, 2018
Inventories
Finished goods	$	23	$	16
Service parts	12		12
Total inventories	$	35	$	28
Deferred revenue
Deferred revenue, current	$	498	$	490
Long-term deferred revenue	82		105
Total deferred revenue	$	580	$	595

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Goodwill and Acquired Intangible Assets

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Acquired Intangible Assets

Goodwill and Acquired Intangible Assets

Effective January 1, 2019, the Company implemented an organizational change to its operating segments and will report future results under the separate segments: Americas, EMEA and APAC. The following table identifies the activity relating to goodwill by operating segment.

In millions	December 31, 2018		Reassignment of Goodwill			Currency translation adjustments		June 30, 2019
Goodwill
Americas	$	253	$	—		$	—	$	253
International	142		(142		)	—		—
EMEA	—		88			—		88
APAC	—		54			1		55
Total goodwill	$	395	$	—		$	1	$	396

Acquired intangible assets were specifically identified when acquired and are deemed to have finite lives. The gross carrying amount and accumulated amortization for the Company's acquired intangible assets were as follows:

		June 30, 2019					December 31, 2018
In millions	Amortization Life (in Years)	Gross Carrying Amount		Accumulated Amortization and Currency Translation Adjustments			Gross Carrying Amount		Accumulated Amortization and Currency Translation Adjustments
Acquired intangible assets
Intellectual property/developed technology	1 to 7	$	35	$	(23	)	$	35	$	(20	)

The aggregate amortization expense (actual and estimated) for acquired intangible assets is as follows:

	Three Months Ended June 30				Six Months Ended June 30,
In millions	2019		2018		2019		2018
Amortization expense	$	1	$	2	$	3	$	4

	Actual		For the years ended (estimated)
In millions	2018		2019		2020		2021		2022
Amortization expense	$	7	$	6	$	4	$	4	$	2

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. As a result of the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act”), the Company changed its indefinite reversal assertion related to its undistributed earnings of its foreign subsidiaries and no longer considers a majority of its foreign earnings permanently reinvested outside of the United States ("U.S."). As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.

The effective tax rate is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
In millions	2019		2018		2019		2018
Effective tax rate	120.0	%	33.3	%	(120.0	)%	(50.0	)%

For the three months and six months ended June 30, 2019, a $4 million discrete tax item was recorded related to an uncertain tax position resulting from the reversal of the Tax Court’s decision in the Altera case by the Ninth Circuit Court of Appeals on June 7, 2019. The Altera case focused on whether current U.S. Treasury Regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations are valid. As a result of this discrete item and incremental tax expense related to equity compensation, the Company recorded income tax expense of $6 million on a pre-tax net loss of $5 million for the six months ended June 30, 2019, resulting in an effective income tax rate of (120.0)%.

There were no material discrete tax items recorded for the three or six month periods ended June 30, 2018. Discrete tax items related to interest accruals on uncertain tax positions and equity-based compensation resulted in income tax expense of $1 million on a pre-tax net loss of $2 million for the six months ended June 30, 2018, resulting in an effective income tax rate of (50.0)%.

The Company estimates its annual effective tax rate for 2019 to be approximately 21%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction. The 2017 Tax Act subjects U.S. shareholders to a tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to GILTI in the year the tax is incurred. The Company does not expect a material amount of tax expense related to GILTI based on our forecasted marginal effective tax rate for 2019.

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Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

As a portion of Teradata’s operations is conducted outside the U.S. and in currencies other than the U.S. dollar, the Company is exposed to potential gains and losses from changes in foreign currency exchange rates. In an attempt to mitigate the impact of currency fluctuations, the Company uses foreign exchange forward contracts to hedge transactional exposures resulting predominantly from foreign currency denominated inter-company receivables and payables. The forward contracts are designated as fair value hedges of specified foreign currency denominated inter-company receivables and payables and generally mature in three months or less. The fair values of foreign exchange contracts are based on market spot and forward exchange rates and represent estimates of possible value that may not be realized in the future. Across its portfolio of contracts, Teradata has both long and short positions relative to the U.S. dollar. As a result, Teradata’s net involvement is less than the total contract notional amount of the Company’s foreign exchange forward contracts.

Gains and losses from foreign exchange forward contracts are fully recognized each period and reported along with the offsetting gain or loss of the related hedged item, either in cost of revenues or in other income (expense), depending on the nature of the related hedged item.

In June 2018, Teradata executed a five-year interest rate swap with a $500 million initial notional amount to hedge the floating interest rate of its Term Loan, as more fully described in Note 11. The Company uses interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facility. The notional amount of the hedge will step-down according to the amortization schedule of the term loan. The notional amount of the hedge was $494 million as of June 30, 2019.

The Company performed an initial effectiveness assessment in the third quarter of 2018 on the interest rate swap and the hedge was determined to be effective. The hedge is being evaluated qualitatively on a quarterly basis for effectiveness. Changes in fair value are recorded in Accumulated Other Comprehensive Loss and periodic settlements of the swap will be recorded in interest expense along with the interest on amounts outstanding under the term loan facility.

The following table identifies the contract notional amount of the Company’s derivative financial instruments:

	As of
In millions	June 30, 2019		December 31, 2018
Contract notional amount of foreign exchange forward contracts	$	156	$	256
Net contract notional amount of foreign exchange forward contracts	$	46	$	35
Contract notional amount of interest rate swap	$	494	$	500

All derivatives are recognized in the condensed consolidated balance sheets at their fair value. The notional amounts represent agreed-upon amounts on which calculations of dollars to be exchanged are based and are an indication of the extent of Teradata’s involvement in such instruments. These notional amounts do not represent amounts exchanged by the parties and, therefore, are not a measure of the instruments. Refer to Note 10 for disclosures related to the fair value of all derivative assets and liabilities.

The Company does not hold or issue derivative financial instruments for trading purposes, nor does it hold or issue leveraged derivative instruments. By using derivative financial instruments to hedge exposures to changes in foreign exchange and interest rates, the Company exposes itself to credit risk. The Company manages exposure to counterparty credit risk by entering into derivative financial instruments with highly rated institutions that can be expected to fully perform under the terms of the applicable contracts.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

In the ordinary course of business, the Company is subject to proceedings, lawsuits, governmental investigations, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, tax matters and other regulatory compliance and general matters. We are not currently a party to any litigation, nor are we aware of any pending or threatened litigation against us that we believe would materially affect our business, operating results, financial condition or cash flows.

Guarantees and Product Warranties. Guarantees associated with the Company’s business activities are reviewed for appropriateness and impact to the Company’s financial statements. Periodically, the Company’s customers enter into various leasing arrangements with a third-party leasing company as part of a revenue transaction, whereby the leasing company purchases the equipment from Teradata and leases it to the customer. In some instances, the Company guarantees the leasing company a minimum value at the end of the lease term on the leased equipment. As of June 30, 2019, the maximum future payment obligation of this guaranteed value and the associated liability balance was $3 million.

The Company provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls and cost of replacement parts. For each consummated sale, the Company recognizes the total customer revenue and

records the associated warranty liability under other current liabilities in the balance sheet using pre-established warranty percentages for that product class.

The following table identifies the activity relating to the warranty reserve for the six months ended June 30:

In millions	2019			2018
Warranty reserve liability
Beginning balance at January 1	$	3		$	4
Accrual of warranties issued	1			2
Settlements (in cash or in kind)	(2		)	(3		)
Balance at June 30	$	2		$	3

The Company also offers extended and/or enhanced coverage to its customers in the form of maintenance contracts. The Company accounts for these contracts by deferring the related maintenance revenue over the extended and/or enhanced coverage period. Costs associated with maintenance support are expensed as incurred. Amounts associated with these maintenance contracts are not included in the table above.

In addition, the Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third-party asserts patent or other infringement on the part of the customer for its use of the Company’s products. The Company has entered into indemnification agreements with the officers and directors of its subsidiaries. From time to time, the Company also enters into agreements in connection with its acquisition and divesture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement, and as such the Company has not recorded a liability in connection with these indemnification arrangements. Historically, payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

Concentrations of Risk. The Company is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments, and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Teradata’s business often involves large transactions with customers, and if one or more of those customers were to default in its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses were adequate at June 30, 2019 and December 31, 2018.

The Company is also potentially subject to concentrations of supplier risk. Our hardware components are assembled exclusively by Flex Ltd. (“Flex”). Flex procures a wide variety of components used in the manufacturing process on behalf of the Company. Although many of these components are available from multiple sources, Teradata utilizes preferred supplier relationships to provide more consistent and optimal quality, cost and delivery. Typically, these preferred suppliers maintain alternative processes and/or facilities to ensure continuity of supply. Given the Company’s strategy to outsource its manufacturing activities to Flex and to source certain components from single suppliers, a disruption in production at Flex or at a supplier could impact the timing of customer shipments and/or Teradata’s operating results. In addition, a significant change in the forecasts to any of these preferred suppliers could result in purchase obligations for components that may be in excess of demand.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value measurements are established utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as significant other observable inputs, such as quoted prices in active markets for similar assets or liabilities, or quoted prices in less-active markets for identical assets; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s assets and liabilities measured at fair value on a recurring basis include money market funds, interest rate swaps and foreign currency exchange contracts. A portion of the Company’s excess cash reserves are held in money market funds which generate interest income based on the prevailing market rates. Money market funds are included in cash and cash equivalents in the Company’s balance sheet. Money market fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy.

When deemed appropriate, the Company minimizes its exposure to changes in foreign currency exchange rates through the use of derivative financial instruments, specifically, foreign exchange forward contracts. Additionally, in June 2018, Teradata executed a five-year interest rate swap with a $500 million initial notional amount in order to hedge the floating interest rate on its term-loan. The fair value of these contracts and swaps are measured at the end of each interim reporting period using observable inputs other than quoted prices, specifically market spot and forward exchange rates. As such, these derivative instruments are classified within Level 2 of the valuation hierarchy. Fair value of unrealized gains for open contracts are recorded in other assets and the fair value of unrealized losses are recorded in other liabilities in the Company's balance sheet. The fair value of foreign exchange forward contracts recorded in other assets was $1 million and the amount recorded in other liabilities was immaterial at June 30, 2019. The amount of assets and liabilities at December 31, 2018 was not material. Realized gains and losses from the Company’s fair value hedges net of corresponding gains or losses on the underlying exposures were immaterial for the three and six months ended June 30, 2019 and 2018.

The Company’s other assets and liabilities measured at fair value on a recurring basis and subject to fair value disclosure requirements at June 30, 2019 and December 31, 2018 were as follows:

			Fair Value Measurements at Reporting Date Using
In millions	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds at June 30, 2019	$	218	$	218	$	—	$	—
Money market funds at December 31, 2018	$	246	$	246	$	—	$	—
Liabilities
Interest rate swap at June 30, 2019	$	20	$	—	$	20	$	—
Interest rate swap at December 31, 2018	$	7	$	—	$	7	$	—

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Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt

Debt

On June 11, 2018, Teradata replaced its existing five-year, $400 million revolving credit facility with a new 400 million $400 million revolving credit facility (the “Credit Facility”). The Credit Facility ends on June 11, 2023, at which point any remaining outstanding borrowings would be due for repayment unless extended by agreement of the parties for up to two additional one-year periods. In addition, under the terms of the Revolving Credit Agreement, Teradata from time to time and subject to certain conditions may increase the lending commitments

under the Revolving Credit Agreement in an aggregate principal amount up to an additional $200 million, to the extent that existing or new lenders agree to provide such additional commitments. The outstanding principal amount of the Revolving Credit Agreement bears interest at a floating rate based upon, at Teradata’s option, a negotiated base rate or a Eurodollar rate plus, in each case, a margin based on Teradata’s leverage ratio. In the near term, Teradata would anticipate choosing a floating rate based on London Interbank Offered Rate (“LIBOR”). The Credit Facility is unsecured but is guaranteed by certain of Teradata’s material domestic subsidiaries and contains certain representations and warranties, conditions, affirmative, negative and financial covenants, and events of default customary for such facilities. As of June 30, 2019, the Company had no borrowings outstanding under the Credit Facility, leaving $400 million in additional borrowing capacity available under the Credit Facility. The Company was in compliance with all covenants as of  June 30, 2019.

Also, on June 11, 2018, Teradata closed on a new senior unsecured $500 million five-year term loan, the proceeds of which plus additional cash-on-hand were used to pay off the remaining $525 million of principal on its existing term loan. The $500 million term loan is payable in quarterly installments, which commenced on June 30, 2019 with 1.25% of the initial principal amount due on each of the first eight payment dates; 2.50% of the initial principal amount due on each of the next four payment dates; 5.0% of the initial principal amount due on each of the next three payment dates; and all remaining principal due on June 11, 2023. The outstanding principal amount under the term loan agreement bears interest at a floating rate based upon a negotiated base rate or a Eurodollar rate plus a margin based on the leverage ratio of the Company. As of June 30, 2019, the term loan principal outstanding was $494 million. As disclosed in Note 8, Teradata entered into an interest rate swap to hedge the floating interest rate of the Term Loan. As a result of the swap, Teradata’s fixed rate on the term loan equals 2.86% plus the applicable leverage-based margin as defined in the Term Loan agreement. As of June 30, 2019, the all-in fixed rate is 4.36%. The Company was in compliance with all covenants as of June 30, 2019.

Teradata’s term loan is recognized on the Company’s balance sheet at its unpaid principal balance and is not subject to fair value measurement. However, given that the loan carries a variable rate, the Company estimates that the unpaid principal balance of the term loan would approximate its fair value. If measured at fair value in the financial statements, the Company’s term loan would be classified as Level 2 in the fair value hierarchy.

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

Lessee

The Company adopted ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach utilizing the optional transition method. Prior year financial statements were not recast using this approach. The Company elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $68 million and $66 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings or cash flows.

The Company leases property and equipment under finance and operating leases. The Company's operating leases consist of automobiles in certain countries and real estate, including office, storage and parking spaces. The duration of these leases range from 2 to 10 years. The Company's finance leases primarily consist of equipment financed for the purpose of delivering services to our customers. For leases with terms greater than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. Many of our leases include variable rental escalation clauses which are recognized when incurred. Some of our leases also include renewal options and/or termination options that are factored into the determination of lease payments and lease terms when it is reasonably certain that the Company will exercise these options. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a

straight-line basis over the lease term. For real estate leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs). For automobile leases we account for lease and non-lease components together.

When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, real estate leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate used in the calculation of the lease liability is based on the secured rate associated with financed lease obligations for each location of leased property.

The table below presents the lease-related assets and liabilities recorded on the balance sheet:

		As of
in millions, except weighted average calculations	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease assets	Right of use assets - operating lease, net	$	58
Finance lease assets	Property and equipment, net	90
Total lease assets		$	148
Liabilities
Current
Operating	Current portion of operating lease liability	$	20
Finance	Current portion of finance lease liability	32
Noncurrent
Operating	Operating lease liability	44
Finance	Finance lease liability	54
Total lease liabilities		$	150
Weighted-average remaining lease term
Operating leases		3.78 years
Finance leases		2.59 years
Weighted-average discount rate
Operating leases(1)		5.00		%
Finance leases		4.70		%

⁽¹⁾ Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Lessee Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
in millions	June 30, 2019			June 30, 2019
Finance lease cost
Depreciation of leased assets	5			9
Interest of lease liabilities	1			2
Operating lease cost	6			18
Sub-lease income from real estate properties owned and leased	(2		)	(4		)
Total lease cost	$	10		$	25

Other Information

The table below presents supplemental cash flow information related to cash paid for amounts included in the measurement of lease liabilities:

	Six Months Ended
in millions	June 30, 2019
Operating cash flows for operating leases	$	12
Operating cash flows for finance leases	$	1
Financing cash flows for finance leases	$	9

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of June 30, 2019:

in millions	Operating Leases			Finance Leases
2019 (balance of year)	$	13		$	21
2020	23			35
2021	17			30
2022	11			5
2023	7			—
Thereafter	5			—
Total minimum lease payments	76			91
Less: amount of lease payments representing interest	(12		)	(5		)
Present value of future minimum lease payments	64			86
Less: current obligations under leases	(20		)	(32		)
Long-term lease obligations	$	44		$	54

The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions	Operating Leases		Finance Leases
2019	$	24	$	19
2020	20		31
2021	12		—
2022	11		—
2023	6		—
Thereafter	2		—
Total minimum lease payments	$	75	$	50

Lessor

The Company receives rental revenue for leasing hardware offerings to its customers. For our hardware rental offering, the Company owns or leases the hardware and may or may not provide managed services. Leases sometimes include options to renew but typically do not include lessee purchase options. The revenue for these operating leases is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Equipment used for this revenue is reported within Property and equipment, net on the condensed consolidated balance sheet.

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at June 30, 2019:

in millions	Rental Revenue
2019 (balance of year)	$	38
2020	57
2021	43
2022	14
2023	—
Total	$	152

Rental revenue for these operating leases, reported within recurring revenue on the condensed consolidated statements of (loss) income, was $16 million and $30 million for the three and six months ended June 30, 2019, and $9 million and $19 million for the three and six months ended June 30, 2018.

Leases

Leases

Lessee

The Company adopted ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach utilizing the optional transition method. Prior year financial statements were not recast using this approach. The Company elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $68 million and $66 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings or cash flows.

The Company leases property and equipment under finance and operating leases. The Company's operating leases consist of automobiles in certain countries and real estate, including office, storage and parking spaces. The duration of these leases range from 2 to 10 years. The Company's finance leases primarily consist of equipment financed for the purpose of delivering services to our customers. For leases with terms greater than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. Many of our leases include variable rental escalation clauses which are recognized when incurred. Some of our leases also include renewal options and/or termination options that are factored into the determination of lease payments and lease terms when it is reasonably certain that the Company will exercise these options. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a

straight-line basis over the lease term. For real estate leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs). For automobile leases we account for lease and non-lease components together.

When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, real estate leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate used in the calculation of the lease liability is based on the secured rate associated with financed lease obligations for each location of leased property.

The table below presents the lease-related assets and liabilities recorded on the balance sheet:

		As of
in millions, except weighted average calculations	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease assets	Right of use assets - operating lease, net	$	58
Finance lease assets	Property and equipment, net	90
Total lease assets		$	148
Liabilities
Current
Operating	Current portion of operating lease liability	$	20
Finance	Current portion of finance lease liability	32
Noncurrent
Operating	Operating lease liability	44
Finance	Finance lease liability	54
Total lease liabilities		$	150
Weighted-average remaining lease term
Operating leases		3.78 years
Finance leases		2.59 years
Weighted-average discount rate
Operating leases(1)		5.00		%
Finance leases		4.70		%

⁽¹⁾ Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Lessee Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
in millions	June 30, 2019			June 30, 2019
Finance lease cost
Depreciation of leased assets	5			9
Interest of lease liabilities	1			2
Operating lease cost	6			18
Sub-lease income from real estate properties owned and leased	(2		)	(4		)
Total lease cost	$	10		$	25

Other Information

The table below presents supplemental cash flow information related to cash paid for amounts included in the measurement of lease liabilities:

	Six Months Ended
in millions	June 30, 2019
Operating cash flows for operating leases	$	12
Operating cash flows for finance leases	$	1
Financing cash flows for finance leases	$	9

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of June 30, 2019:

in millions	Operating Leases			Finance Leases
2019 (balance of year)	$	13		$	21
2020	23			35
2021	17			30
2022	11			5
2023	7			—
Thereafter	5			—
Total minimum lease payments	76			91
Less: amount of lease payments representing interest	(12		)	(5		)
Present value of future minimum lease payments	64			86
Less: current obligations under leases	(20		)	(32		)
Long-term lease obligations	$	44		$	54

The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions	Operating Leases		Finance Leases
2019	$	24	$	19
2020	20		31
2021	12		—
2022	11		—
2023	6		—
Thereafter	2		—
Total minimum lease payments	$	75	$	50

Lessor

The Company receives rental revenue for leasing hardware offerings to its customers. For our hardware rental offering, the Company owns or leases the hardware and may or may not provide managed services. Leases sometimes include options to renew but typically do not include lessee purchase options. The revenue for these operating leases is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Equipment used for this revenue is reported within Property and equipment, net on the condensed consolidated balance sheet.

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at June 30, 2019:

in millions	Rental Revenue
2019 (balance of year)	$	38
2020	57
2021	43
2022	14
2023	—
Total	$	152

Rental revenue for these operating leases, reported within recurring revenue on the condensed consolidated statements of (loss) income, was $16 million and $30 million for the three and six months ended June 30, 2019, and $9 million and $19 million for the three and six months ended June 30, 2018.

Leases

Leases

Lessee

The Company adopted ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach utilizing the optional transition method. Prior year financial statements were not recast using this approach. The Company elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $68 million and $66 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings or cash flows.

The Company leases property and equipment under finance and operating leases. The Company's operating leases consist of automobiles in certain countries and real estate, including office, storage and parking spaces. The duration of these leases range from 2 to 10 years. The Company's finance leases primarily consist of equipment financed for the purpose of delivering services to our customers. For leases with terms greater than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. Many of our leases include variable rental escalation clauses which are recognized when incurred. Some of our leases also include renewal options and/or termination options that are factored into the determination of lease payments and lease terms when it is reasonably certain that the Company will exercise these options. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a

straight-line basis over the lease term. For real estate leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs). For automobile leases we account for lease and non-lease components together.

When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, real estate leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate used in the calculation of the lease liability is based on the secured rate associated with financed lease obligations for each location of leased property.

The table below presents the lease-related assets and liabilities recorded on the balance sheet:

		As of
in millions, except weighted average calculations	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease assets	Right of use assets - operating lease, net	$	58
Finance lease assets	Property and equipment, net	90
Total lease assets		$	148
Liabilities
Current
Operating	Current portion of operating lease liability	$	20
Finance	Current portion of finance lease liability	32
Noncurrent
Operating	Operating lease liability	44
Finance	Finance lease liability	54
Total lease liabilities		$	150
Weighted-average remaining lease term
Operating leases		3.78 years
Finance leases		2.59 years
Weighted-average discount rate
Operating leases(1)		5.00		%
Finance leases		4.70		%

⁽¹⁾ Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Lessee Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
in millions	June 30, 2019			June 30, 2019
Finance lease cost
Depreciation of leased assets	5			9
Interest of lease liabilities	1			2
Operating lease cost	6			18
Sub-lease income from real estate properties owned and leased	(2		)	(4		)
Total lease cost	$	10		$	25

Other Information

The table below presents supplemental cash flow information related to cash paid for amounts included in the measurement of lease liabilities:

	Six Months Ended
in millions	June 30, 2019
Operating cash flows for operating leases	$	12
Operating cash flows for finance leases	$	1
Financing cash flows for finance leases	$	9

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of June 30, 2019:

in millions	Operating Leases			Finance Leases
2019 (balance of year)	$	13		$	21
2020	23			35
2021	17			30
2022	11			5
2023	7			—
Thereafter	5			—
Total minimum lease payments	76			91
Less: amount of lease payments representing interest	(12		)	(5		)
Present value of future minimum lease payments	64			86
Less: current obligations under leases	(20		)	(32		)
Long-term lease obligations	$	44		$	54

The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions	Operating Leases		Finance Leases
2019	$	24	$	19
2020	20		31
2021	12		—
2022	11		—
2023	6		—
Thereafter	2		—
Total minimum lease payments	$	75	$	50

Lessor

The Company receives rental revenue for leasing hardware offerings to its customers. For our hardware rental offering, the Company owns or leases the hardware and may or may not provide managed services. Leases sometimes include options to renew but typically do not include lessee purchase options. The revenue for these operating leases is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Equipment used for this revenue is reported within Property and equipment, net on the condensed consolidated balance sheet.

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at June 30, 2019:

in millions	Rental Revenue
2019 (balance of year)	$	38
2020	57
2021	43
2022	14
2023	—
Total	$	152

Rental revenue for these operating leases, reported within recurring revenue on the condensed consolidated statements of (loss) income, was $16 million and $30 million for the three and six months ended June 30, 2019, and $9 million and $19 million for the three and six months ended June 30, 2018.

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Earnings per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the reported period. The calculation of diluted earnings per share is similar to basic earnings per share, except that the weighted average number of shares outstanding includes the dilution from potential shares resulting from stock options, restricted stock awards and other stock awards. The components of basic and diluted earnings per share are as follows:

	Three Months Ended June 30,					Six Months Ended   June 30,
In millions, except per share amounts	2019			2018		2019			2018
Net (loss) income attributable to common stockholders	$	(1	)	$	4	$	(11	)	$	(3	)
Weighted average outstanding shares of common stock	115.5			119.5		116.3			120.4
Dilutive effect of employee stock options, restricted stock and other stock awards	—			2.0		—			—
Common stock and common stock equivalents	115.5			121.5		116.3			120.4
Net loss (income) per share:
Basic	$	(0.01	)	$	0.03	$	(0.09	)	$	(0.02	)
Diluted	$	(0.01	)	$	0.03	$	(0.09	)	$	(0.02	)

For the three months ended June 30, 2019 and six months ended June 30, 2019 and 2018, due to the net loss attributable to Teradata common stockholders, potential common shares that would cause dilution, such as employee stock options, restricted shares and other stock awards, have been excluded from the diluted share count because their effect would have been anti-dilutive. The fully diluted shares would have been 116.7 million for the three months ended June 30, 2019 and 117.7 million and 122.5 million for the six months ended June 30, 2019 and 2018, respectively.

Options to purchase 1.6 million and 1.8 million shares of common stock for the three and six months ended June 30, 2019 and 2.5 million and 2.6 million shares of common stock for the three and six months ended June 30, 2018 were not included in the computation of diluted earnings per share because their exercise prices of these options were greater than the average market price of the common shares for the period, and therefore would have been anti-dilutive.

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Segment and Other Supplemental Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment and Other Supplemental Information

Segment and Other Supplemental Information

Effective January 1, 2019, Teradata implemented an organizational change in which Teradata now manages its business under three geographic regions, which are also the Company’s operating segments: (1) Americas region (North America and Latin America); (2) EMEA region (Europe, Middle East and Africa) and (3) APAC region (Asia Pacific and Japan). For purposes of discussing results by segment, management excludes the impact of certain items, consistent with the manner by which management evaluates the performance of each segment. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by Teradata management to make decisions regarding the segments and to assess financial performance. The chief operating decision maker, who is our President and Chief Executive Officer, evaluates the performance of the segments based on revenue and multiple profit measures, including segment gross profit. For management reporting purposes assets are not allocated to the segments. Prior periods have been restated to conform to the current year presentation.

The following table presents segment revenue and segment gross profit for the Company:

	Three Months Ended June 30,				Six Months Ended   June 30,
In millions	2019		2018		2019		2018
Segment revenue
Americas	$	269	$	287	$	538	$	551
EMEA	122		127		235		276
APAC	87		130		173		223
Total revenue	478		544		946		1,050
Segment gross profit
Americas	158		154		315		301
EMEA	57		54		107		117
APAC	37		58		71		93
Total segment gross profit	252		266		493		511
Stock-based compensation costs	4		4		7		8
Acquisition, integration, reorganization and transformation-related costs	2		—		5		3
Amortization of capitalized software costs	10		12		21		27
Total gross profit	236		250		460		473
Selling, general and administrative expenses	145		163		296		315
Research and development expenses	81		77		159		152
Income from operations	$	10	$	10	$	5	$	6

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Reorganization and Business Transformation

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Reorganization and Business Transformation

Reorganization and Business Transformation

On June 4, 2018, the Company approved a plan to consolidate certain of its operations, including transitioning its corporate headquarters to San Diego, California from its location in Dayton, Ohio. This plan, which is being executed in connection with Teradata’s comprehensive business transformation from a data warehouse company to a data analytics platform company, is intended to better align the Company’s skills and resources to effectively pursue opportunities in the marketplace. The Company recognized costs of $23 million in 2018 and $12 million in 2019 for employee separation benefits, transition support, facilities lease related costs, outside service, legal and other exit-related costs. The employee separation benefit costs are being expensed over the time period that the employees have to work to earn them. The Company expects that it will incur costs and charges in the range of approximately $35 to $40 million related to the plan and expects the actions will be completed in 2019.

Cash paid in 2018 related to the plan listed above was $11 million. The 2019 activity and the reserves related to the plan are as follows:

In millions	Balance at December 31, 2018		Expense accruals		Cash payments			Balance at June 30, 2019
Employee separation benefits costs related to headquarter transition and business transformation	$	11	$	4	$	(13	)	$	2
Transition support and other exit related costs for the headquarter transition and business transformation	1		2		(3		)	—
Total	$	12	$	6	$	(16	)	$	2

In addition, the Company incurred $6 million of accelerated amortization in the first six months of 2019 for right-of-use assets associated with the lease on its prior corporate headquarters. The remaining lease liability is included in our operating lease obligations as of June 30 2019 and is not included in the table above.

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New Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

Fair Value Measurement.  In August 2018, the Financial Accounting Standards Board ("FASB") issued new guidance that modifies disclosure requirements related to fair value measurement. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this update while delaying adoption of the additional disclosures until their effective date. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Compensation-Retirement Benefits-Defined Benefit Plans-General. In August 2018, the FASB issued new guidance that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2020, with early adoption permitted, and is to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. In August 2018, the FASB issued new guidance that reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). For public companies, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The effects of this standard on our financial position, results of operations or cash flows are not expected to be material.

Codification Improvements to Financial Instruments-Credit Losses, Derivatives and Hedging, and Financial Instruments. In June 2016, the FASB issued Accounting Standards, Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. Since the

issuance of this accounting standard, the Board has identified certain areas that require clarification and improvement. In May 2019, the FASB issued guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets measured at amortized cost (except held-to-maturity securities) using the fair value option. The election is to be applied on an instrument-by-instrument basis. For entities that have already adopted the new credit losses standard, the relief is effective for fiscal years beginning after December 15, 2019 and interim periods therein, and early adoption is permitted. For all other entities, the guidance is effective upon adoption of the new credit losses standard. The company is currently evaluating this new guidance to determine the impact it may have on our financial position, results of operations or cash flows.

Recently Adopted Guidance

Leases. In February 2016, the FASB issued new guidance under Topic 842, which requires a lessee to account for leases as finance or operating leases. Both types of leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement and cash flow recognition. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Entities will classify leases to determine how to recognize lease-related revenue and expense. We adopted the new standard as of January 1, 2019 using the modified retrospective adoption approach utilizing the optional transition method with prior periods not recast and have elected certain of the practical expedients allowed under the standard. The Condensed Consolidated Financial Statements for the three and six months ended June 30, 2019 are presented under the new standard, while comparative years presented are not adjusted and continue to be reported in accordance with our historical accounting policy. See Note 12 for more information.

Comprehensive Income. In February 2018, the FASB issued new guidance for Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02), which allows companies to reclassify stranded tax effects resulting from the Tax Reform Act from accumulated other comprehensive income to retained earnings. The impact of applying this standard did not have a material impact on our condensed consolidated financial statements.

Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. In June 2018, the FASB issued new guidance to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments are intended to assist entities in evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) or as exchange (reciprocal) transactions and determining whether a contribution is conditional. The Company adopted this guidance on January 1, 2019, which did not have a material impact on our condensed consolidated financial statements.

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue

The following table presents a disaggregation of revenue:

	Three months ended June 30,				Six months ended June 30,
in millions	2019		2018		2019		2018
Americas
Recurring	$	217	$	199	$	430	$	392
Perpetual software licenses and hardware	12		40		31		62
Consulting services	40		48		77		97
Total Americas	269		287		538		551
EMEA
Recurring	75		70		148		137
Perpetual software licenses and hardware	10		10		17		43
Consulting services	37		47		70		96
Total EMEA	122		127		235		276
APAC
Recurring	46		43		91		85
Perpetual software licenses and hardware	7		47		12		61
Consulting services	34		40		70		77
Total APAC	87		130		173		223
Total Revenue	$	478	$	544	$	946	$	1,050

Schedule of Assets and Liabilities Related to Contracts with Customers

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:

	As of
in millions	June 30, 2019		December 31, 2018
Accounts receivable, net	$	377	$	588
Contract assets	$	6	$	14
Current deferred revenue	$	498	$	490
Long-term deferred revenue	$	82	$	105

Schedule of Estimated Revenue Expected to be Recognized in the Future

The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at June 30, 2019:

in millions	Total at June 30, 2019		Year 1		Year 2 and Thereafter
Remaining unsatisfied obligations	$	2,530	$	1,182	$	1,348

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Contract Costs (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Activity Related to Capitalized Contract Cost

The following table identifies the activity relating to capitalized contract costs:

in millions	December 31, 2018	Capitalized	Amortization		June 30, 2019
Capitalized contract costs	54	17	(8	)	63

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Supplemental Financial Information (Tables)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Supplemental Financial Information

	As of
In millions	June 30, 2019		December 31, 2018
Inventories
Finished goods	$	23	$	16
Service parts	12		12
Total inventories	$	35	$	28
Deferred revenue
Deferred revenue, current	$	498	$	490
Long-term deferred revenue	82		105
Total deferred revenue	$	580	$	595

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Goodwill and Acquired Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Activity Relating to Goodwill by Operating Segment

The following table identifies the activity relating to goodwill by operating segment.

In millions	December 31, 2018		Reassignment of Goodwill			Currency translation adjustments		June 30, 2019
Goodwill
Americas	$	253	$	—		$	—	$	253
International	142		(142		)	—		—
EMEA	—		88			—		88
APAC	—		54			1		55
Total goodwill	$	395	$	—		$	1	$	396

Schedule of Gross Carrying Amount and Accumulated Amortization for the Company's Acquired Intangible Assets

The gross carrying amount and accumulated amortization for the Company's acquired intangible assets were as follows:

		June 30, 2019					December 31, 2018
In millions	Amortization Life (in Years)	Gross Carrying Amount		Accumulated Amortization and Currency Translation Adjustments			Gross Carrying Amount		Accumulated Amortization and Currency Translation Adjustments
Acquired intangible assets
Intellectual property/developed technology	1 to 7	$	35	$	(23	)	$	35	$	(20	)

Schedule of Aggregate Amortization Expense for Acquired Intangible Assets

The aggregate amortization expense (actual and estimated) for acquired intangible assets is as follows:

	Three Months Ended June 30				Six Months Ended June 30,
In millions	2019		2018		2019		2018
Amortization expense	$	1	$	2	$	3	$	4

	Actual		For the years ended (estimated)
In millions	2018		2019		2020		2021		2022
Amortization expense	$	7	$	6	$	4	$	4	$	2

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Effective Tax Rate

The effective tax rate is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
In millions	2019		2018		2019		2018
Effective tax rate	120.0	%	33.3	%	(120.0	)%	(50.0	)%

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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table identifies the contract notional amount of the Company’s derivative financial instruments:

	As of
In millions	June 30, 2019		December 31, 2018
Contract notional amount of foreign exchange forward contracts	$	156	$	256
Net contract notional amount of foreign exchange forward contracts	$	46	$	35
Contract notional amount of interest rate swap	$	494	$	500

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Warranty Reserve Activity

The following table identifies the activity relating to the warranty reserve for the six months ended June 30:

In millions	2019			2018
Warranty reserve liability
Beginning balance at January 1	$	3		$	4
Accrual of warranties issued	1			2
Settlements (in cash or in kind)	(2		)	(3		)
Balance at June 30	$	2		$	3

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis and Subject to Fair Value Disclosure Requirements

The Company’s other assets and liabilities measured at fair value on a recurring basis and subject to fair value disclosure requirements at June 30, 2019 and December 31, 2018 were as follows:

			Fair Value Measurements at Reporting Date Using
In millions	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market funds at June 30, 2019	$	218	$	218	$	—	$	—
Money market funds at December 31, 2018	$	246	$	246	$	—	$	—
Liabilities
Interest rate swap at June 30, 2019	$	20	$	—	$	20	$	—
Interest rate swap at December 31, 2018	$	7	$	—	$	7	$	—

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Lease-related Assets And Liabilities Recorded on the Balance Sheet

The table below presents the lease-related assets and liabilities recorded on the balance sheet:

		As of
in millions, except weighted average calculations	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease assets	Right of use assets - operating lease, net	$	58
Finance lease assets	Property and equipment, net	90
Total lease assets		$	148
Liabilities
Current
Operating	Current portion of operating lease liability	$	20
Finance	Current portion of finance lease liability	32
Noncurrent
Operating	Operating lease liability	44
Finance	Finance lease liability	54
Total lease liabilities		$	150
Weighted-average remaining lease term
Operating leases		3.78 years
Finance leases		2.59 years
Weighted-average discount rate
Operating leases(1)		5.00		%
Finance leases		4.70		%

⁽¹⁾ Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Schedule of Lease Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three and six months ended June 30, 2019:

	Three Months Ended			Six Months Ended
in millions	June 30, 2019			June 30, 2019
Finance lease cost
Depreciation of leased assets	5			9
Interest of lease liabilities	1			2
Operating lease cost	6			18
Sub-lease income from real estate properties owned and leased	(2		)	(4		)
Total lease cost	$	10		$	25

The table below presents supplemental cash flow information related to cash paid for amounts included in the measurement of lease liabilities:

	Six Months Ended
in millions	June 30, 2019
Operating cash flows for operating leases	$	12
Operating cash flows for finance leases	$	1
Financing cash flows for finance leases	$	9

Schedule of Operating Lease Liability Maturities

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of June 30, 2019:

in millions	Operating Leases			Finance Leases
2019 (balance of year)	$	13		$	21
2020	23			35
2021	17			30
2022	11			5
2023	7			—
Thereafter	5			—
Total minimum lease payments	76			91
Less: amount of lease payments representing interest	(12		)	(5		)
Present value of future minimum lease payments	64			86
Less: current obligations under leases	(20		)	(32		)
Long-term lease obligations	$	44		$	54

Schedule of Finance Lease Liability Maturities

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of June 30, 2019:

in millions	Operating Leases			Finance Leases
2019 (balance of year)	$	13		$	21
2020	23			35
2021	17			30
2022	11			5
2023	7			—
Thereafter	5			—
Total minimum lease payments	76			91
Less: amount of lease payments representing interest	(12		)	(5		)
Present value of future minimum lease payments	64			86
Less: current obligations under leases	(20		)	(32		)
Long-term lease obligations	$	44		$	54

Schedule of Future Minimum Rental Payments for Operating Leases

The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions	Operating Leases		Finance Leases
2019	$	24	$	19
2020	20		31
2021	12		—
2022	11		—
2023	6		—
Thereafter	2		—
Total minimum lease payments	$	75	$	50

Schedule of Future Minimum Lease Payments for Capital Leases

The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions	Operating Leases		Finance Leases
2019	$	24	$	19
2020	20		31
2021	12		—
2022	11		—
2023	6		—
Thereafter	2		—
Total minimum lease payments	$	75	$	50

Estimated Rental Revenue Expected to be Recognized in the Future

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at June 30, 2019:

in millions	Rental Revenue
2019 (balance of year)	$	38
2020	57
2021	43
2022	14
2023	—
Total	$	152

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Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Components of Basic and Diluted Earnings Per Share

The components of basic and diluted earnings per share are as follows:

	Three Months Ended June 30,					Six Months Ended   June 30,
In millions, except per share amounts	2019			2018		2019			2018
Net (loss) income attributable to common stockholders	$	(1	)	$	4	$	(11	)	$	(3	)
Weighted average outstanding shares of common stock	115.5			119.5		116.3			120.4
Dilutive effect of employee stock options, restricted stock and other stock awards	—			2.0		—			—
Common stock and common stock equivalents	115.5			121.5		116.3			120.4
Net loss (income) per share:
Basic	$	(0.01	)	$	0.03	$	(0.09	)	$	(0.02	)
Diluted	$	(0.01	)	$	0.03	$	(0.09	)	$	(0.02	)

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Segment and Other Supplemental Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Regional Segment Revenue and Gross Margin

The following table presents segment revenue and segment gross profit for the Company:

	Three Months Ended June 30,				Six Months Ended   June 30,
In millions	2019		2018		2019		2018
Segment revenue
Americas	$	269	$	287	$	538	$	551
EMEA	122		127		235		276
APAC	87		130		173		223
Total revenue	478		544		946		1,050
Segment gross profit
Americas	158		154		315		301
EMEA	57		54		107		117
APAC	37		58		71		93
Total segment gross profit	252		266		493		511
Stock-based compensation costs	4		4		7		8
Acquisition, integration, reorganization and transformation-related costs	2		—		5		3
Amortization of capitalized software costs	10		12		21		27
Total gross profit	236		250		460		473
Selling, general and administrative expenses	145		163		296		315
Research and development expenses	81		77		159		152
Income from operations	$	10	$	10	$	5	$	6

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Reorganization and Business Transformation (Tables)

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Activity and Related Reserves

Cash paid in 2018 related to the plan listed above was $11 million. The 2019 activity and the reserves related to the plan are as follows:

In millions	Balance at December 31, 2018		Expense accruals		Cash payments			Balance at June 30, 2019
Employee separation benefits costs related to headquarter transition and business transformation	$	11	$	4	$	(13	)	$	2
Transition support and other exit related costs for the headquarter transition and business transformation	1		2		(3		)	—
Total	$	12	$	6	$	(16	)	$	2

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Revenue from Contracts with Customers - Disaggregation of Revenue from Contracts with Customers (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Revenue	$ 478	$ 544	$ 946	$ 1,050
Americas
Disaggregation of Revenue [Line Items]
Revenue	269	287	538	551
EMEA
Disaggregation of Revenue [Line Items]
Revenue	122	127	235	276
APAC
Disaggregation of Revenue [Line Items]
Revenue	87	130	173	223
Recurring
Disaggregation of Revenue [Line Items]
Revenue	338	312	669	614
Recurring | Americas
Disaggregation of Revenue [Line Items]
Revenue	217	199	430	392
Recurring | EMEA
Disaggregation of Revenue [Line Items]
Revenue	75	70	148	137
Recurring | APAC
Disaggregation of Revenue [Line Items]
Revenue	46	43	91	85
Perpetual software licenses and hardware
Disaggregation of Revenue [Line Items]
Revenue	29	97	60	166
Perpetual software licenses and hardware | Americas
Disaggregation of Revenue [Line Items]
Revenue	12	40	31	62
Perpetual software licenses and hardware | EMEA
Disaggregation of Revenue [Line Items]
Revenue	10	10	17	43
Perpetual software licenses and hardware | APAC
Disaggregation of Revenue [Line Items]
Revenue	7	47	12	61
Consulting services | Americas
Disaggregation of Revenue [Line Items]
Revenue	40	48	77	97
Consulting services | EMEA
Disaggregation of Revenue [Line Items]
Revenue	37	47	70	96
Consulting services | APAC
Disaggregation of Revenue [Line Items]
Revenue	$ 34	$ 40	$ 70	$ 77

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Revenue from Contracts with Customers - Contract Balances (Details) - USD ($) $ in Millions	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Revenue from Contract with Customer [Abstract]
Accounts receivable, net	$ 377	$ 588
Contract assets	6	14
Deferred revenue, current	498	490	$ 490
Long-term deferred revenue	$ 82	$ 105	$ 105

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Revenue from Contracts with Customers - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Deferred revenue, revenue recognized	$ 402
Remaining performance obligation, amount of customer only general cancellation	1,636
Remaining performance obligation, amount of non-cancelable contracts	$ 437

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Revenue from Contracts with Customers - Transaction Price Allocated to the Remaining Performance Obligations (Details) $ in Millions	Jun. 30, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation	$ 2,530
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation	$ 1,182
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation	$ 1,348
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, period

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Contract Costs (Details) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Capitalized contract cost, amortization period	4 years
Capitalized Contract Cost, Net [Roll Forward]
Capitalized contract cost, net at period start	$ 54
Capitalized	17
Amortization	(8)
Capitalized contract cost, net at period end	$ 63

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Supplemental Financial Information (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Inventories
Finished goods	$ 23		$ 16
Service parts	12		12
Total inventories	35		28
Deferred revenue
Deferred revenue, current	498	$ 490	490
Long-term deferred revenue	82	$ 105	105
Total deferred revenue	$ 580		$ 595

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Goodwill and Acquired Intangible Assets - Goodwill by Operating Segment (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 395
Reassignment of Goodwill	0
Currency translation adjustments	1
Ending balance	396
Americas
Goodwill [Roll Forward]
Beginning balance	253
Reassignment of Goodwill	0
Currency translation adjustments	0
Ending balance	253
International
Goodwill [Roll Forward]
Beginning balance	142
Reassignment of Goodwill	(142)
Currency translation adjustments	0
Ending balance	0
EMEA
Goodwill [Roll Forward]
Beginning balance	0
Reassignment of Goodwill	88
Currency translation adjustments	0
Ending balance	88
APAC
Goodwill [Roll Forward]
Beginning balance	0
Reassignment of Goodwill	54
Currency translation adjustments	1
Ending balance	$ 55

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Goodwill and Acquired Intangible Assets - Gross Carrying Amount and Accumulated Amortization for Teradata Acquired Intangible Assets (Detail) - Intellectual property/developed technology - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Acquired Finite-Lived Intangible Assets
Gross Carrying Amount	$ 35	$ 35
Accumulated Amortization and Currency Translation Adjustments	$ (23)	$ (20)
Minimum
Acquired Finite-Lived Intangible Assets
Amortization Life (in Years)	1 year
Maximum
Acquired Finite-Lived Intangible Assets
Amortization Life (in Years)	7 years

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Goodwill and Acquired Intangible Assets - Aggregate Amortization Expense for Acquired Intangible Assets (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 1	$ 2	$ 3	$ 4	$ 7
Amortization expense - Remainder of 2019	6		6
Amortization expense - 2020	4		4
Amortization expense - 2021	4		4
Amortization expense - 2022	$ 2		$ 2

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Income Taxes (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2019
Operating Loss Carryforwards [Line Items]
Discrete income tax item	$ 4		$ 4
Income tax expense	6	$ 2	6	$ 1
Pre-tax net loss	$ (5)	$ (6)	$ 5	$ 2
Effective tax rate (percentage)	120.00%	33.30%	(120.00%)	(50.00%)
Scenario, Forecast
Operating Loss Carryforwards [Line Items]
Effective tax rate (percentage)					21.00%

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Derivative Instruments and Hedging Activities (Detail) - USD ($) $ in Millions	1 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Interest Rate Swap
Derivative
Derivative, term of contract (in years)	5 years
Derivative, contract notional amount	$ 500	$ 494	$ 500
Foreign Exchange Contract
Derivative
Derivative, contract notional amount		156	256
Net contract notional amount of foreign exchange forward contracts		$ 46	$ 35

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Commitments and Contingencies - Additional Information (Detail)	Jun. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Maximum future payment obligation of the guaranteed value and associated liabilities	$ 3,000,000

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Commitments and Contingencies - Warranty Reserve Activity (Detail) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance at January 1	$ 3	$ 4
Accrual of warranties issued	1	2
Settlements (in cash or in kind)	(2)	(3)
Balance at June 30	$ 2	$ 3

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Fair Value Measurements (Detail) - USD ($) $ in Millions	1 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of foreign currency forward contract		$ 1
Money market funds		218	$ 246
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds		218	246
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds		0	0
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds		0	0
Interest Rate Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative, term of contract (in years)	5 years
Derivative, notional amount	$ 500	494	500
Interest rate swap		20	7
Interest Rate Swap | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap		0	0
Interest Rate Swap | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap		20	7
Interest Rate Swap | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap		$ 0	$ 0

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Debt - Additional Information (Detail)			6 Months Ended
	Jun. 11, 2018 USD ($)	Jun. 10, 2018 USD ($)	Jun. 30, 2019 USD ($) renewal
Debt Instrument
Number of renewals | renewal			2
Renewal term			1 year
Borrowings outstanding under the Credit Facility			$ 0
Term Loan
Debt Instrument
Extinguishment of debt, amount	$ 525,000,000
Revolving Credit Facility Ending in March 2020 | Revolving Credit Facility
Debt Instrument
Term of loan (years)		5 years
Credit facility maximum borrowing capacity		$ 400,000,000
Credit facility, additional borrowings capacity			200,000,000
Revolving Credit Facility Ending In June 2023 | Revolving Credit Facility
Debt Instrument
Credit facility maximum borrowing capacity	$ 400,000,000		400,000,000
Senior Unsecured term loan Issued June 2018 | Senior Unsecured Term Loan
Debt Instrument
Term of loan (years)	5 years
Debt instrument, face amount	$ 500,000,000
Principal outstanding			$ 494,000,000
Debt Instrument, Redemption, Period One
Debt Instrument
Term loan, payable quarterly installments (percentage)	1.25%
Debt Instrument, Redemption, Period Two
Debt Instrument
Term loan, payable quarterly installments (percentage)	2.50%
Debt Instrument, Redemption, Period Three
Debt Instrument
Term loan, payable quarterly installments (percentage)	5.00%
Interest Rate Swap
Debt Instrument
Fixed rate on term loan (percentage)			2.86%
All-in fixed rate, percentage			4.36%

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Leases - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jan. 01, 2019
Lessee, Lease, Description [Line Items]
Lease assets	$ 148		$ 148
Lease liabilities	150		150
Lease income	$ 16	$ 9	$ 30	$ 19
Minimum
Lessee, Lease, Description [Line Items]
Operating lease, term of contract	2 years		2 years
Maximum
Lessee, Lease, Description [Line Items]
Operating lease, term of contract	10 years		10 years
Accounting Standards Update 2016-02
Lessee, Lease, Description [Line Items]
Lease assets					$ 68
Lease liabilities					$ 66

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Leases - Lease-related Assets and Liabilities recorded on the Balance Sheet (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Assets
Operating lease assets	$ 58	$ 0
Finance lease assets	90
Total lease assets	148
Liabilities
Current portion of operating lease liability	20	0
Current portion of finance lease liability	32	17
Noncurrent portion of operating lease liability	44	0
Long-term finance lease obligations	54	$ 30
Total lease liabilities	$ 150
Weighted-average remaining lease term
Weighted-average remaining lease term, operating leases	3 years 9 months 10 days
Weighted-average remaining lease term, finance leases	2 years 7 months 2 days
Weighted-average discount rate
Weighted-average discount rate, operating leases (percentage)	5.00%
Weighted-average discount rate, finance leases (percentage)	4.70%

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Leases - Lease Cost (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases [Abstract]
Finance lease cost, amortization of leased assets	$ 5	$ 9
Finance lease cost, interest of lease liabilities	1	2
Operating lease cost	6	18
Sub-lease income from real estate properties owned and leased	(2)	(4)
Total lease cost	$ 10	$ 25

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Leases - Other Information (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Leases [Abstract]
Operating cash flows for operating leases	$ 12
Operating cash flows for finance leases	1
Financing cash flows for finance leases	$ 9	$ 0

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Leases - Undiscounted Cash Flows under ASC 842 (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Operating Leases
2019 (balance of year)	$ 13
2020	23
2021	17
2022	11
2023	7
Thereafter	5
Total minimum lease payments	76
Less: amount of lease payments representing interest	(12)
Present value of future minimum lease payments	64
Less: current obligations under leases	(20)	$ 0
Long-term lease operating lease obligations	44	0
Finance Leases
2019 (balance of year)	21
2020	35
2021	30
2022	5
2023	0
Thereafter	0
Total minimum lease payments	91
Less: amount of lease payments representing interest	(5)
Present value of future minimum lease payments	86
Less: current obligations under leases	(32)	(17)
Long-term finance lease obligations	$ 54	$ 30

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Leases - Undiscounted Cash Flows under ASC 840 (Details) $ in Millions	Dec. 31, 2018 USD ($)
Operating Leases
2019	$ 24
2020	20
2021	12
2022	11
2023	6
Thereafter	2
Total minimum lease payments	75
Finance Leases
2019	19
2020	31
2021	0
2022	0
2023	0
Thereafter	0
Total minimum lease payments	$ 50

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Leases - Rental Revenue (Details) $ in Millions	Jun. 30, 2019 USD ($)
Leases [Abstract]
2019 (balance of year)	$ 38
2020	57
2021	43
2022	14
2023	0
Total	$ 152

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Earnings per Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Net (loss) income attributable to common stockholders	$ (1)	$ 4	$ (11)	$ (3)
Weighted average outstanding shares of common stock (in shares)	115.5	119.5	116.3	120.4
Dilutive effect of employee stock options, restricted stock and other stock awards (in shares)	0.0	2.0	0.0	0.0
Common stock and common stock equivalents (in shares)	115.5	121.5	116.3	120.4
Net loss (income) per share:
Basic (in dollars per share)	$ (0.01)	$ 0.03	$ (0.09)	$ (0.02)
Diluted (in dollars per share)	$ (0.01)	$ 0.03	$ (0.09)	$ (0.02)
Weighted average number of shares outstanding, diluted and anti-dilutive (in shares)	116.7		117.7	122.5
Antidilutive options to purchase were excluded from computation of diluted earnings per share (in shares)	1.6	2.5	1.8	2.6

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Segment and Other Supplemental Information - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2019 segment
Segment Reporting [Abstract]
Number of operating segments	3

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Segment and Other Supplemental Information - Regional Segment Revenue and Gross Margin for Company (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information
Segment revenue	$ 478	$ 544	$ 946	$ 1,050
Gross profit	236	250	460	473
Selling, general and administrative expenses	145	163	296	315
Research and development expenses	81	77	159	152
Income from operations	10	10	5	6
Americas
Segment Reporting Information
Segment revenue	269	287	538	551
EMEA
Segment Reporting Information
Segment revenue	122	127	235	276
APAC
Segment Reporting Information
Segment revenue	87	130	173	223
Operating segments
Segment Reporting Information
Gross profit	252	266	493	511
Operating segments | Americas
Segment Reporting Information
Gross profit	158	154	315	301
Operating segments | EMEA
Segment Reporting Information
Gross profit	57	54	107	117
Operating segments | APAC
Segment Reporting Information
Gross profit	37	58	71	93
Segment reconciling items
Segment Reporting Information
Stock-based compensation costs	4	4	7	8
Acquisition, integration, reorganization and transformation-related costs	2	0	5	3
Amortization of capitalized software costs	$ 10	$ 12	$ 21	$ 27

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Reorganization and Business Transformation (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Restructuring Cost and Reserve [Line Items]
Restructuring costs	$ 12	$ 23
Cash payments for restructuring	16	11
Restructuring Reserve [Roll Forward]
Balance at December 31, 2018	12
Expense accruals	6
Cash payments	(16)	(11)
Balance at June 30, 2019	2	12
Accelerated depreciation	6
Employee separation benefits costs related to headquarter transition and business transformation
Restructuring Cost and Reserve [Line Items]
Cash payments for restructuring	13
Restructuring Reserve [Roll Forward]
Balance at December 31, 2018	11
Expense accruals	4
Cash payments	(13)
Balance at June 30, 2019	2	11
Transition support and other exit related costs for the headquarter transition and business transformation
Restructuring Cost and Reserve [Line Items]
Cash payments for restructuring	3
Restructuring Reserve [Roll Forward]
Balance at December 31, 2018	1
Expense accruals	2
Cash payments	(3)
Balance at June 30, 2019	0	$ 1
Minimum
Restructuring Cost and Reserve [Line Items]
Restructuring and related cost, expected cost	35
Maximum
Restructuring Cost and Reserve [Line Items]
Restructuring and related cost, expected cost	$ 40

XML

Label	Element	Value
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets	us-gaap_NewAccountingPronouncementOrChangeInAccountingPrincipleCumulativeEffectOfChangeOnEquityOrNetAssets1	$ 26,000,000
Restricted Cash and Cash Equivalents	us-gaap_RestrictedCashAndCashEquivalents	2,000,000
Restricted Cash and Cash Equivalents	us-gaap_RestrictedCashAndCashEquivalents	1,000,000
Retained Earnings [Member]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets	us-gaap_NewAccountingPronouncementOrChangeInAccountingPrincipleCumulativeEffectOfChangeOnEquityOrNetAssets1	$ 26,000,000